ACCT2102 SP21 Comprehensive Problem 1 (2)

ACCT2102 SP21 Comprehensive Problem 1

Answer all questions and Label all work as required

Part 1.

Rhiner Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:

Raw materials$42,000

Work in process$20,000

Finished goods$36,000

The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company’s predetermined overhead rate of $16.50 per direct labor-hour was based on a cost formula that estimated $660,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:

Raw materials were purchased on account, $520,000.

Raw materials used in production, $465,000. All of the raw materials were used as direct materials.

The following costs were accrued for employee services: direct labor, $605,000; indirect labor, $150,000; selling and administrative salaries, $240,000.

Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $357,000.

Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $505,000.

Manufacturing overhead cost was applied to production. The company actually worked 42,000 direct labor-hours on all jobs during the year.

Jobs costing $1,685,000 to manufacture according to their job cost sheets were completed during the year.

Jobs were sold on account to customers during the year for a total of $2,750,000. The jobs cost $1,695,000 to manufacture according to their job cost sheets.

Required (Show all work/Calculations!)

What is the journal entry to record the purchase of raw materials?

General Journal Debit($) Credit($)

Work in progress 465000

Raw Materials 465000

(To record the raw materials used in production)

What is the ending balance in Raw Materials? (Show T-Account)

Raw Materials:

Beginning Balance $42000

Add: $520000

Less: Raw materials used in production $-465000

Ending Balance $97000

What is the journal entry to record the labor costs incurred during the year?

General Journal Debit($) Credit($)

Salaries and administrative salaries $240,000

Manufacturing overhead $150,000

Work in progress $605000

Wages payable $995000

(To record the labor cost incurred)

What is the total amount of manufacturing overhead applied to production during the year? (Show complete calculations)

Manufacturing overhead applied=16.50*42000hours= $693000

What is the total manufacturing cost added to Work in Process during the year?

Raw Materials $ 465000

Direct Labour $605000

Manufacturing overhead $693000

Cost added to work in progress $1763000

What is the journal entry to record the transfer of completed jobs that is referred to above?

General Journal Debit($) Credit($)

Finished Goods 1685000

Work in progress 1685000

(To record the transfer of completed jobs)

What is the ending balance in Work in Process?

Beg. Balance $20,000

Raw materials used in production $465,000

Direct labor $605,000

Manufacturing overhead applied $693000 $1685000 Cost of goods sold

End Balance $98000

What is the total amount of actual manufacturing overhead cost incurred during the year? (Show T-Account)Beg. Bal. 0

Indirect labor $150,000

Depreciation,insurance,utilities $505,000

End Bal. $655000

Is manufacturing overhead underapplied or overapplied for the year? By how much?

Overapplied. The applied overhead is more than the actual.

$693000-$655000=$38000

What is the cost of goods available for sale during the year? (Show complete calculations)

Cost of goods available for sale $1721000

Beg. Balance $36,000

Cost of good manufactured $1685000

What is the journal entry to record the cost of goods sold referred to above?

General journal Debit($) Credit($)

Cost of goods sold $1,695,000

Finished goods $1,695,000

What is the ending balance in Finished Goods? (Show T-Account)

Beg. Balance $36000

Manufacturing overhead $1685000 $1695000

End Bal $26000

Assuming that the company closes its underapplied or overapplied overhead to Cost of Goods Sold, what is the adjusted cost of goods sold for the year?

Cost of goods sold $1695000

Less: manufacturing overhead $38000

Adjusted cost of goods sold $1657000

What is the gross margin for the year?

Sale $2,750,000

Less:COGS $1657000

Gross profit $1093000

What is the net operating income for the year?

Gross Profit $1093000

Less:Selling and adm salaries $240,000

Expenses $357,000

Net profit $496000

It is recommended that you work through all journal entries, t-accounts and schedules/statements to correctly formulate your answers.