Question

Jordan Manufacturing Corporation was started with the issuance of common stock for $75,000. It purchased $6,700 of raw materials and worked on three job orders during Year 1 for which data follow. (Assume that all transactions are for cash unless otherwise indicated.)

	Direct Raw Materials Used				Direct Labor
Job 1		$	1,100			$	1,900
Job 2			1,900				3,900
Job 3			2,900				2,000
Total		$	5,900			$	7,800

Factory overhead is applied using a predetermined overhead rate of $0.70 per direct labor dollar. Jobs 2 and 3 were completed during the period and Job 3 was sold for $10,100 cash. Jordan paid $600 for selling and administrative expenses. Actual factory overhead was $5,960.

Required

1. a. Record the preceding events in a horizontal statements model. The first event for Year 1 has been recorded as an example.

2. c. Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.

3. d. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for Year 1.

Answer 1

Horizontal Satement Models
	Assets					Equity
Particluar	Cash	Manufacturing Overhead	Raw Materials	Work in Process	Finished	Common Stock	Retained Earnings	Revenues	Expenses	Net Income
Issuance of Common Stock	$75,000					$75,000
Material Purchased	-$6,700		$6,700
Material Used			-$5,900	$5,900
Labour Used & Paid	-$7,800			$7,800
Applied Overhead ( 7800*0.70)		-$5,460		$5,460
Actual Overhead Paid	-$5,960	$5,960
Trff Finished from WIP ((1900+2900)+(3900+2000)*1.70)				-$14,830	$14,830
Job-3 Sold (2900+(2000*1.70)	$10,100				-$6,300			$10,100	$6,300
Selling & Admin	-$600								$600
Underapplied Overhead		-$500							$500
							$2,700
	$64,040	$0	$800	$4,330	$8,530	$75,000	$2,700	$10,100	$7,400	$2,700

Jordan Manufacturing Company
Income Statement
Sales Revenue	$10,100.00
Less Cot of Goods Sold ( Adjusted) (6300+500)	$6,800.00
Gross Profit	$3,300.00
Less: Selling and Administrative Expenses	-$600.00
Net Operating Income	$2,700.00
Jordan Manufacturing Company
Balance Sheet
Assets
Cash	$64,040.00
Finished Goods Inventory	$8,530.00
Work in Process Inventory	$4,330.00
Raw Materials Inventory	$800.00
Total Assets	$77,700.00
Equity
Common Stock	$75,000.00
Retained Earnings	$2,700.00
Total Equity	$77,700.00

Requirement -c: Closing Journal Entry
Account Tittle	Debit	Credit
Cost of Goods Sold	500
Manufacturing Overhead		500
To record Underapplied Overhead