Problem 326 Journal Entries TAccounts Financial Statements L

Problem 3-26 Journal Entries; T-Accounts, Financial Statements [LO3-1, LO3-2, LO3-3, LO3-4, LO3-5, LO3-6, LO3-7 Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year (all purchases and services were acquired on account) a. Raw materials purchased for use in production, $245,000 b. Raw materials requisitioned for use in production (all direct materials), $230,000 c. Utility bills were incurred, $68,000 (85% related to factory operations, and the remainder related to selling and administrative activities). d. Salary and wage costs were in curred: Direct labor (1,125 hours) Indirect labor Selling and administrative salaries S 275,000 S 99,000 $155,000 e. Maintenance costs were incurred in the factory, $63,000. f. Advertising costs were incurred, $145,000 g. Depreciation was recorded for the year, $81,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment) h. Rental cost incurred on buildings, $106,000 (75% related to factory operations, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, ? j. Cost of goods manufactured for the year, $860,000 k. Sales for the year (all on account) totaled $1,650,000. These goods cost $890,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were Raw materials Work in process Finished Goods $39,000 $ 30,000 $69,000 Required: 1.Prepare journal entries to record the above data. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.)

Solution

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FROYA FABRKKER A/S
General journal
Ref	Account	Debit	Credit
a	Raw materials	245000
	Accounts payable		245000
	(Raw materials purchased )
b	Work in process	230000
	Raw materials		230000
	(Raw materials issued for production)
c	Manufacturing overhead	57800
	Utilities expense	10200
	Accounts payable		68000
	(Utilities expense incurred - 85% of $68,000 for factory balance selling)
d	Work in process	275000
	Manufacturing overhead	99000
	Salaries and wages expense	155000
	Salaries and wages payable		529000
e	Manufacturing overhead	63000
	Accounts payable		63000
	(Maintenance expenses for factory)
f	Advertising expenses	145000
	Accounts payable		145000
	(Advertising expenses incurred)
g	Manufacturing overhead	60750
	Depreciation expense	20250
	Accumulated depreciation		81000
	(Depreciation expense recorded - Total $81,000 , 75% for factory)
h	Manufacturing overhead	79500
	Rental expense	26500
	Accounts payable		106000
	(Rental expense recorded)
i	Work in process	360000
	Manufacturing overhead		360000
	(Manufacturing overhead applied to production - 1,125 hours @$320 per hr)
j	Finished goods	860000
	Work in process		860000
	(Cost of finished goods manufactured transferred to finished goods a/c)
k	Cost of goods sold	890000
	Finished goods		890000
	(Cost of finished goods sold recorded)
k	Accounts receivable	1650000
	Sales revenue		1650000
	(Sale of goods recorded)
l	Cost of goods sold	50
	Manufacturing overhead		50
	(Transfer of underapplied overhead to cost og goods sold)
	* Predetermnied overhead rate = Estimated overhead cost / Estimated direct labor hours
	= 336,000 / 1050 = $320 per direct labor hour