Question

Really only need 4 and down solved. Overapplied amount needs to be applied across a few accounts, but I'm stuck.

Mountain Manufacturing Company produces custom stamped metal parts for a variety of customers in Western Canada. During January, the company had two jobs in process. Job A was an order for 1,200 stamped parts and was started in December. Job A had $12,000 of manufacturing costs already accumulated on January 1. Job B was an order for 1,000 stamped parts and was started in January.

The company used a job-order costing system. Total manufacturing overhead for the year was estimated to be $576,000. Mountain Manufacturing uses direct labour-hours as the allocation base to establish its predetermined overhead rate. A total of 19,200 direct labour-hours are expected to be worked during the year. On January 1, the start of the company’s fiscal year, inventory account balances were as follows:

Raw Materials	$	15,000
Work in Process	$	12,000
Finished Goods	$	10,000

During the month of January, the following transactions were completed:

1. Raw materials were purchased for $30,000.
2. Raw materials were requisitioned for use in production in the amount of $35,000. Of this amount, $25,000 was related to manufacturing ($5,000 for Job A and $20,000 for Job B) and the rest were indirect materials.
3. In January, $32,000 of direct labour ($7,000 for Job A and $25,000 for Job B). In addition, $2,000 of indirect labour costs were incurred.
4. In January, the company incurred the following general factory costs: Utilities expense of $8,000, rent on factory equipment of $8,000, and insurance costs of $1,900.
5. The company recognized $10,000 in depreciation on factory equipment.
6. The company applied manufacturing overhead to Job A and Job B. A total of 350 direct labour-hours were spent completing Job A and 1,250 direct labour-hours were recorded for Job B.
7. Administrative salaries of $30,000 were paid in January.
8. Selling expenses totalled $6,000 in January.
9. Job A was completed in January. The completed cost of Job A according to the job cost sheet was $34,500. Job B remains in process at the end of January.
10. Sales of all 1,200 units in Job A were recorded on account in the amount of $48,300 in January.

Required:

1. Prepare journal entries to record the transactions for January. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Prepare T-accounts. Determine ending balances in the inventory accounts and in the Manufacturing Overhead account.

3. Prepare a schedule of cost of goods manufactured.

4a. Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

4b. Determine the adjusted Cost of Goods Sold.

5. Prepare an income statement for the month of January

Predetermined overhead rate = $576000/19200 = $30 per direct labor hour

1.

Transaction	General Journal	Debit	Credit
a.	Raw materials	30000
	Cash/Accounts payable		30000
	(To record purchase of raw materials)
b.	Work in process	25000
	Manufacturing overhead	10000
	Raw materials		35000
	(To record raw materials requistioned)
c.	Work in process	32000
	Manufacturing overhead	2000
	Wages payable		34000
	(To record labor costs incurred)
d.	Manufacturing overhead	17900
	Accounts payable		17900
	(To record general factory costs incurred)
e.	Manufacturing overhead	10000
	Accumulated depreciation-equipment		10000
	(To record depreciation on factory equipment)
f.	Work in process [(350 + 1250) x $30]	48000
	Manufacturing overhead		48000
	(To record manufacturing overhead applied)
g.	Salaries and wages expense	30000
	Cash		30000
	(To record administrative salaries paid)
h.	Selling expenses	6000
	Cash/Accounts payable		6000
	(To record selling expenses)
i.	Finished goods	34500
	Work in process		34500
	(To record job completed and transferred)
j(1)	Accounts receivable	48300
	Sales revenue		48300
	(To record sales on account)
j(2)	Cost of goods sold	34500
	Finished goods		34500
	(To record the cost of the goods sold)

Note: Use cash account or accounts payable account as appropriate since it is not given in the question whether certain expenses are paid in cash or incurred.

2.

Raw Materials
Beg. Bal.	15000
a.	30000	35000	b.
End. Bal.	10000
Work In Process
Beg. Bal.	12000
b.	25000	34500	i.
c.	32000
f.	48000
End. Bal.	82500
Finished Goods
Beg. Bal.	10000
i.	34500	34500	j(2)
End. Bal.	10000
Manufacturing Overhead
b.	10000	48000	f.
c.	2000
d.	17900
e.	10000
End. Bal.		8100
Sales Revenue
		48300	j(1)
Cost of Goods Sold
j(2)	34500

3.

Mountain Manufacturing Company
Schedule of Cost of Goods Manufactured
For the Month of January
Beginning raw materials $	15000
Add: Raw material purchases	30000
Raw materials available for use	45000
Less: Ending raw materials	10000
Raw materials used	35000
Less: Indirect raw materials	10000
Direct materials		25000
Direct labor		32000
Manufacturing overhead applied		48000
Total current manufacturing costs		105000
Add: Beginning work in process		12000
Total cost of work in process		117000
Less: Ending work in process		82500
Cost of goods manufactured $		34500

Answer 1

This is a case of over-application of manufacturing overhead as the applied overheads are more than the actual overheads which are 39,100, resulting in balance of 8,100 in the manufacturing overhead account. In order to dispose off such balance, it will be transferred to cost of goods sold account with the help of following journal entry-

Manufacturing Overhead. 8,100

Cost of goods sold. 8,100

(Disposing off the balance in manufacturing overheads account)

After taking into account the above entry,

Adjusted cost of goods sold = 34,500 - 8,100

= 26,400

Income Statement

Sales. 48,300

Less- Adjusted COGS. 26,400

GROSS PROFIT. 21,900

Less- Selling exp. 6,000

NET PROFIT. 15,900