Charlie's Chocolate Factory Ltd$.$ is based in Airdrie, Alberta. They manufacture parts and equipment for chocolatiers and chocolate shops. Their trial balance as at January $1,2024,$ the start of their new fiscal year, is below.

Cash $$37,900$

Accounts Receivable $$45,330$

Raw Materials Inventory $$34,760$

Work in Progress Inventory $$75,925$

Finished Good Inventory $$83,350$

Supplies Inventory $$16,800$

Prepaid Expenses $$12,120$

Property and Equipment $$620,940$

Accumulated Depreciation $$190,300$

Accounts Payable $$85,125$

Staff Payroll and Wages Payable $$16,340$

Common Shares $$195,500$

Preferred Shares $$125,000$

Retained Earnings $$220,750$

Charlie's Chocolate Factory Ltd$.$ allocates manufacturing overhead costs to each project on the basis of direct labour hours. The senior management team estimates that they will incur $$325,900$ in manufacturing overhead costs and will work $38,750$ direct labour hours during the fiscal year.

The following transactions took place throughout the fiscal year. Unless otherwise noted, the transactions were booked on account.

$1.$ Raw materials inventory consists of stainless steel sheets, plastic molds and other assembly parts. A total of $$1,360,400$ in raw materials were purchased on account.

$2.$ Raw materials were issued into production in the amount of $$1,225,900.$

$3.$ Accrued wages for factory staff amounted to $$390,400.$ Of this amount, $35\%$ was indirect labour. The remainder was direct labour. A total of $42,641$

direct labour hours were worked during the year.

$4.$ Selling and administrative payroll expenses were accrued in the amount of $$250,790.$

$5.$ A total of $$27,850$ in factory supplies were purchased on account during the year. Of the total ampunt in Supplies Inventory, $$29,700$ were requisitioned into production.

$6.$ Marketing expenses for the year were $$154,200.$

$7.$ Depreciation expense for the year was $$75,600.80\%$ related to factory buildings and equipment. The remainder related to office equipment.

$"8.$ Property tax expense for the year were $$38,500.$ Of this amount, $70\%$ related to the factory and $30\%$ related to the office.

Insurance expense for the fiscal year was $$28,225.$ The company allocates $85\%$ to the factory and the remainder to head office."

$9.$ Manufacturing overhead expenses were applied to projects.

$10.$ Projects completed during the year incurred total production costs of $$1,800,650$ as tracked on the job cost sheets.

$11.$ Revenue booked on account was $$3,400,960.$ Cost of Goods Sold were $$1,850,330.$

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Required:

a$)$ Prepare the journal entries for the transactions incurred throughout the fiscal year. $(22$ marks$)$

b$)$ Prepare the T$-$account for the Manufacturing Overhead account. $(6$ marks$)$

c$)$ Is Manufacturing Overhead overapplied or underapplied? Book the journal entry to close overapplied or underapplied Manufacturing Overhead to Cost of Goods Sold. $(4$ marks$)$

d$)$ Prepare the income statement as at December $31,2024,$ assuming an income tax rate of $21\mathrm{.}5\%.(6$ marks$)$

e$)$ What is the total balance in Inventory on the December $31,2024$ balance sheet? Be sure to show all of your work and supporting calculations! $(10$ marks$)$

Answer rating: 100% (QA)

a Journal Entries 1 Raw materials purchased on account Debit Raw Materials Inventory 1360400 Credit Accounts Payable 1360400 2 Raw materials issued in... View the full answer