Assignment:
Depot Products uses a job-order costing system. The company’s inventory balances on January 1, the start of its fiscal year, were as follows:
Raw materials $53,000.00
Work in process $33,400.00
Finished goods $81,000.00
During the year, the following transactions were completed:
a.) Raw materials were purchased on account, $273,000
b.) Raw materials were issued from the storeroom for the use in production, $320,000 (75% direct and 25% indirect)
c.) Employee salaries and wages were accrued as follows: direct labor, $370,000; indirect labor, $100,000; and selling and administrative salaries $85,000
d.) Utility costs were incurred in the factory, $107,000
e.) Advertising costs were incurred in the factory, $168,000
f.) Prepaid insurance expired during the year, $43,000 (95% related to factory operations, and 5% related to selling and administrative activities).
g.) Depreciation was recorded, $280,000 (80% related to factory assets, and 20% related to selling and administrative assets)
h.) Manufacturing overhead was applied to jobs at the rate of 150% of direct labor cost
i.) Goods that cost $1,170,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse
j.) Sales for the year totaled $1,560,000 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $1,190,000
Required:
1.) Prepare journal entries to record the transactions for the year
2.) Prepare T-accounts for Raw materials, Work in Process, Finished Goods, Manufacturing Overhead, and Cost of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts. Compute the ending balance in each account. (Don’t forget to enter the beginning balances in the inventory accounts)
3.) Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close this balance to Cost of Goods Sold.
4.) Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)