Froya Fabrikker A$/$S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job$-$order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor$-$hours. Its predetermined overhead rate was based on a cost formula that estimated $$378,000$ of manufacturing overhead for an estimated allocation base of $900$ direct labor$-$hours. The following transactions took place during the year:

Raw materials purchased on account, $$285,000.$

Raw materials used in production $($all direct materials$),$ $$270,000.$

Utility bills incurred on account, $$76,000(85\%$ related to factory operations, and the remainder related to selling and administrative activities$).$

Accrued salary and wage costs:

Direct labor $(950$ hours$)$ $ $315,000$

Indirect labor $ $107,000$

Selling and administrative salaries $ $195,000$

Maintenance costs incurred on account in the factory, $$71,000$

Advertising costs incurred on account, $$153,000.$

Depreciation was recorded for the year, $$89,000(70\%$ related to factory equipment, and the remainder related to selling and administrative equipment$).$

Rental cost incurred on account, $$114,000(75\%$ related to factory facilities, and the remainder related to selling and administrative facilities$).$

Manufacturing overhead cost was applied to jobs, $$?.$

Cost of goods manufactured for the year, $$940,000.$

Sales for the year $($all on account$)$ totaled $$2,050,000.$ These goods cost $$970,000$ according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials $ $47,000$

Work in Process $ $38,000$

Finished Goods $ $77,000$

Required:

$1.$ Prepare journal entries to record the preceding transactions.

$2.$ Post your entries to T$-$accounts. $($Don$$t forget to enter the beginning inventory balances above.$)$

$3.$ Prepare a schedule of cost of goods manufactured.

$4$A$.$ Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

$4$B$.$ Prepare a schedule of cost of goods sold.

$5.$ Prepare an income statement for the year.

Answer rating: 100% (QA)

1 Prepare journal entries to record the preceding transactions Raw Materials Purchased Debit Raw Materials Inventory 285000 Credit Accounts Payable 28... View the full answer