Froya Fabrikker A/S of Bergen, Norway, 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 based on direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions occurred during the year: Raw materials purchased on account, $200,000. Raw materials used in production (all direct materials), $185,000. Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities). Accrued salary and wage costs: Direct labor (975 hours) $ 230,000 Indirect labor $ 90,000 Selling and administrative salaries $ 110,000 Maintenance costs incurred on account in the factory, $54,000. Advertising costs incurred on account, $136,000. Depreciation recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities). Manufacturing overhead cost applied to jobs, $ ?question mark . Cost of goods manufactured, $770,000. Sales (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets. The beginning balances in the inventory accounts were: Raw Materials $ 30,000 Work in Process $ 21,000 Finished Goods $ 60,000 Practice: 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Froya Fabrikker A/S of Bergen, Norway, 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 based on direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions occurred during the year:

Raw materials purchased on account, $200,000.
Raw materials used in production (all direct materials), $185,000.
Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
Accrued salary and wage costs:

Direct labor (975 hours) $ 230,000

Indirect labor $ 90,000

Selling and administrative salaries $ 110,000
Maintenance costs incurred on account in the factory, $54,000.
Advertising costs incurred on account, $136,000.
Depreciation recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
Manufacturing overhead cost applied to jobs, $ ?question mark .
Cost of goods manufactured, $770,000.
Sales (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.