Almeda Products, Inc., uses a job-order costing system. The company's inventory balances on April 1, the start of its fiscal year, were as follows:
- Raw materials...........................................$32,000
- Work in process........................................ $ 20,000
- Finished goods .........................................$ 48,000
During the year, the following transactions were completed:
a. Raw materials were purchased on account, $170,000.
b.Raw materials were issued from the storeroom for use in production, $180,000 (80% direct and 20% indirect).
c.Employee salaries and wages were accrued as follows: direct labor, $200,000; indirect labor, $82,000;and selling and administrative salaries, $90,000.
d.Utility costs were incurred in the factory, $65,000.
e.Advertising costs were incurred, $100,000.
f.Prepaid insurance expired during the year, $20,000 (90% related to factory operations, and 10% related to selling and administrative activities).
g.Depreciation was recorded, $180,000 (85% related to factory assets, and 15% related to selling and administrative assets).
h.Manufacturing overhead was applied to jobs at the rate of 175% of direct labor cost.
i.Goods that cost $700,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
j.Sales for the year totaled $1,000,000 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $720,000.
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.)