Question

Hudson Company manufactures women’s shoes. It uses a job costing system that allocates factory overhead on the basis of machine-hours. Budgeted factory overhead for the year 2019 was $768,000, and management budgeted 96,000 machine-hours. The company’s income tax rate is 21% (Round income tax to the nearest dollar). Below is Hudson’s trial balance at the beginning of July 2019. Debit Credit Cash…………………………………… $ 7,000 Accounts Receivable…………………… 18,000 Materials Inventory……………………… 9,000 Work in Process…………………………. 20,000 Finished Goods Inventory……………….. 32,000 Prepaid Factory Insurance………………. 4,000 Machinery and Equipment……………… 210,000 Accumulated Depreciation………………. $ 53,000 Accounts Payable………………………… 38,000 Common Stock……………………………… 160,000 Retained Earnings………………………… 49,000 Total……………………………………… $300,000 $300,000 The following transactions are for July 2019: July 1. Materials purchased on account, $40,000. 2. Received a $100,000 loan from New York Bank on a 3-year note payable. 3. Raw materials requisitioned to be used in production, $38,000 (85% direct materials and 15% indirect materials). 5. Factory utilities costs incurred, on account, $19,100. 8. Selling expenses incurred on account, $9,500. 12. Restructuring costs incurred, on account, $48,000. 15. Paid cash for research and development expense, $15,000. 20. Declared a cash dividend , $1,225. 25. Labor costs incurred (but not yet paid): Direct labor………………………………$45,000 Indirect labor…………………………… $10,000 28. Administrative expenses incurred on account, $30,000. 28. Payments to suppliers on account, $140,000. 29. Paid labor costs, $55,000. 29. Paid the cash dividend, of$1,225. 30. Paid New York Bank $1,000 interest on the note payable. 31. Depreciation of machinery and equipment, $36,000. Three fourths of this depreciation is for factory equipment, and the remainder for office equipment. 31. Prepaid factory insurance expired during July, $3,000. 31. Allocate manufacturing overhead to production. Actual machine hours used is 7,500 hours. 31. Goods that cost $140,000 to manufacture were transferred to the finished goods warehouse. 31. Credit sales for July totaled $250,000. The cost of goods sold is $130,000. 31. Collections from customers during July totaled $245,000. 31. Calculate the amount of overallocated or underallocated overhead and close it to the Cost of Goods Sold account. Required 1. Compute the company’s factory overhead allocation rate for the year. 2. Prepare journal entries to record July transactions. Explanations are not required. If needed round numbers to the nearest dollar. Skip a line after each completed journal entry. 3. Post the journal entries to the appropriate general ledger accounts. 4. Prepare a trial balance for July 2019. 6. Prepare a multiple-step income statement and a classified balance sheet for July 2019.

Answer 1