Question

In: Accounting

The Winston Company estimates that the factory overhead for the following year will be $1,216,000. The...

The Winston Company estimates that the factory overhead for the following year will be $1,216,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 38,000 hours. The total machine hours for the year was 54,900. The actual factory overhead for the year was $1,746,000.

Required:

(a) Determine the total factory overhead amount applied.
(b) Calculate the overapplied or underapplied amount for the year. Enter the amount as positive values.
(c) Prepare the journal entry to close Factory Overhead into Cost of Goods Sold. Refer to the Chart of Accounts for exact wording of account titles.

Chart of Accounts

CHART OF ACCOUNTS
Winston Company
General Ledger
ASSETS
110 Cash
121 Accounts Receivable
131 Materials
133 Work in Process
135 Factory Overhead
137 Finished Goods
141 Supplies
142 Prepaid Expenses
181 Land
190 Factory Equipment
191 Accumulated Depreciation
LIABILITIES
210 Accounts Payable
221 Utilities Payable
251 Wages Payable
EQUITY
311 Common Stock
340 Retained Earnings
351 Dividends
390 Income Summary
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Goods Sold
520 Wages Expense
531 Insurance Expense
532 Utilities Expense
533 Office Supplies Expense
560 Depreciation Expense
590 Miscellaneous Expense
710 Interest Expense

Factory Overhead

(a) Determine the total factory overhead amount applied.

Total factory overhead applied

(b) Calculate the overapplied or underapplied amount for the year. Enter the amount as positive values.

Factory overhead by

General Journal

(c) Prepare the journal entry to close Factory Overhead into Cost of Goods Sold on December 31. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

Solutions

Expert Solution

Predetermined Overhead rate per machine hour = Estimated Overhead / estimated Machine hours

= 1216,000 / 38000 = 32 per hour

Question - (a) Determine the total factory overhead amount applied.

In the above calculation 32 per hour means, for each actual hour we work in the factory, $32 overhead shall be applied. It was given that 54,900 hours were actually worked in that year.

Factory overhead applied = 32 * 54900 = 1756,800

Question - (b) Calculate the overapplied or underapplied amount for the year. Enter the amount as positive values.

As against actual overhead of 1746,000 we applied overhead of 1756,800 as factory overhead.

So Factory overhead over-applied = 1756,800 - 1746,000 = 10,800

Question - (c)

Date Description Post.Ref Debit Credit
Dec 31 Factory Overhead 10800
Cost of goods sold    10800

Post.Ref ......... can be left blank. Generally it for posting the page number of the ledger where the journal will be posted.

Your rating helps me .......... thank you


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