Question

Required information

Problem 19-2A Source documents, journal entries, overhead, and financial reports LO P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Bergamo Bay's computer system generated the following trial balance on December 31, 2017. The company’s manager knows something is wrong with the trial balance because it does not show any balance for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition, the accrued factory payroll (Factory Payroll Payable) has not been recorded.

	Debit	Credit
Cash	$58,000
Accounts receivable	36,000
Raw materials inventory	23,000
Work in process inventory	0
Finished goods inventory	6,000
Prepaid rent	2,000
Accounts payable		$9,100
Notes payable		12,100
Common stock		20,000
Retained earnings		92,000
Sales		171,800
Cost of goods sold	106,000
Factory overhead	32,000
Operating expenses	42,000
Totals	$305,000	$305,000

After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

Materials requisition 21-3010:	$4,700	direct materials to Job 402
Materials requisition 21-3011:	$7,900	direct materials to Job 404
Materials requisition 21-3012:	$1,600	indirect materials
Labor time ticket 6052:	$3,000	direct labor to Job 402
Labor time ticket 6053:	$9,000	direct labor to Job 404
Labor time ticket 6054:	$4,000	indirect labor

Jobs 402 and 404 are the only units in process at year-end. The predetermined overhead rate is 150% of direct labor cost.

Problem 19-2A Part 1

Direct materials costs to Work in Process Inventory.

Direct labor costs to Work in Process Inventory.

Overhead costs to Work in Process Inventory.

Indirect materials costs to the Factory Overhead account.

Indirect labor costs to the Factory Overhead account.

Required information

Problem 19-2A Source documents, journal entries, overhead, and financial reports LO P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Bergamo Bay's computer system generated the following trial balance on December 31, 2017. The company’s manager knows something is wrong with the trial balance because it does not show any balance for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition, the accrued factory payroll (Factory Payroll Payable) has not been recorded.

	Debit	Credit
Cash	$58,000
Accounts receivable	36,000
Raw materials inventory	23,000
Work in process inventory	0
Finished goods inventory	6,000
Prepaid rent	2,000
Accounts payable		$9,100
Notes payable		12,100
Common stock		20,000
Retained earnings		92,000
Sales		171,800
Cost of goods sold	106,000
Factory overhead	32,000
Operating expenses	42,000
Totals	$305,000	$305,000

After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

Materials requisition 21-3010:	$4,700	direct materials to Job 402
Materials requisition 21-3011:	$7,900	direct materials to Job 404
Materials requisition 21-3012:	$1,600	indirect materials
Labor time ticket 6052:	$3,000	direct labor to Job 402
Labor time ticket 6053:	$9,000	direct labor to Job 404
Labor time ticket 6054:	$4,000	indirect labor

Jobs 402 and 404 are the only units in process at year-end. The predetermined overhead rate is 150% of direct labor cost.

Problem 19-2A Part 2

2.1 Determine the revised balance of the Factory Overhead account after making the entries in part 1 using T-accounts. Determine whether there is any under- or overapplied overhead for the year.

2.2 Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold, assuming the amount is not material.

Answer 1

2.1				Factory overhead
	Paticulars			Debit	Paticulars			Credit
	Balance	(From trial balance)		32000	Factory overhead applied			18000
	Indirect materials			1600	(Direct labor)*150%
	Indirect labor			4000	(3000+9000)*150%
	Total			37600				18000
	Balance			19600
	If actual overhead> Applied overhead, Then overhead is said to be under applied
	Under applied overhead=Actual overhead cost-Applied overhead=37600-18000=$ 19600
2.2	Adjusting entry to allocate under applied overhead:
	Particulars			Debit	Credit
	Cost of goods sold			19600
	Factory overhead				19600