Question

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the company’s transactions with customers, employees, and suppliers are conducted in cash; there is no credit. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of $200,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:

Raw materials	$	25,000
Work in process	$	10,000
Finished goods	$	40,000

During the year, the following transactions were completed:

a.	Raw materials purchased for cash, $275,000.
b.	Raw materials requisitioned for use in production, $280,000 (materials costing $220,000 were charged directly to jobs; the remaining materials were indirect).
c.	Costs for employee services were incurred as follows:

Direct labor	$	180,000
Indirect labor	$	72,000
Sales commissions	$	63,000
Administrative salaries	$	90,000

d.	Rent for the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
e.	Utility costs incurred in the factory, $57,000.
f.	Advertising costs incurred, $140,000.
g.	Depreciation recorded on equipment, $100,000. ($88,000 of this amount was on equipment used in factory operations; the remaining $12,000 was on equipment used in selling and administrative activities.)
h.	Manufacturing overhead cost was applied to jobs, $?
i.	Goods that had cost $675,000 to manufacture according to their job cost sheets were completed.
j.	Sales for the year totaled $1,250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000.

Required:

1.	Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)

Answer 1

SL NO	ACCOUNT TITLES	DEBIT	CREDIT
A	Raw Materials	275000
	Cash		275000
B	Work in Process	220000
	Manufacturing Overhead	60000
	Raw Materials		280000
C	Work in Process	180000
	Manufacturing Overhead	72000
	Sales Commissions Expense	63000
	Salaries Expense	90000
	cash		405000
D	Manufacturing Overhead	13000
	Rent Expense	5000
	Cash		18000
E	Manufacturing Overhead	57000
	Cash		57000
f	Advertising Expense	140000
	Cash		140000
g	Manufacturing Overhead	88000
	Depreciation Expense	12000
	Accumulated Depreciation		100000
h	Work in process	297000
	Manufacturing overhead		297000
i	Finished goods	675000
	Work in process		675000
j	Cash	1250000
	Sales		1250000
	Cost of goods sold	700000
	Finished goods		700000

Explanation:

h. Predetermined overhead rate = Estimated total manufacturing overhead cost /Estimated total amount of the allocation base

= Rmb 330000 / Rmb 200000 direct labor cost = 165% of direct labor cost

Rmb 180000 actual direct labor cost x 165% = Rmb 297000