Question Completion:
Trial Balance as at December 31, 2017:
Debit Credit
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 80,000
Work in process inventory 0
Finished goods inventory 15,000
Prepaid rent 3,000
Accounts payable 17,000
Notes payable 25,000
Common stock 50,000
Retained earnings 271,000
Sales 373,000
Cost of goods sold 218,000
Factory overhead 115,000
Operating expenses 60,000
Totals $736,000 $736,000
Answer:
Bergamo Bay
1. Journal Entries to assign the following costs:
a. Direct materials costs to Work in Process Inventory.
Debit Work in Process $10,200
Credit Raw materials $10,200
To record direct materials for Job 402.
Debit Work in Process $18,600
Credit Raw materials $18,600
To record direct materials for Job 404.
b. Direct labor costs to Work in Process Inventory.
Debit Work in Process $36,000
Credit Factory Payroll Payable $36,000
To record ticket 6052 direct labor to Job 402.
Debit Work in Process $23,800
Credit Factory Payroll Payable $23,800
To record ticket 6053 direct labor to Job 404.
c. Overhead costs to Work in Process Inventory.
Debit Work in Process $119,600
Credit Factory Overhead $119,600
To apply overhead costs, 200% of direct labor cost to WIP.
d. Indirect materials costs to the Factory Overhead account.
Debit Factory Overhead $5,600
Credit Raw materials $5,600
To record indirect materials to factory overhead.
e. Indirect labor costs to the Factory Overhead account.
Debit Factory Overhead $8,200
Credit Factory Payroll Payable $8,200
To record indirect labor costs to factory overhead.
2. Revised balance of the Factory Overhead account after above entries:
= $9,200
Underapplied overhead = $9,200
Adjusting Journal Entry to Cost of Goods Sold:
Debit Cost of Goods Sold $9,200
Credit Factory Overhead $9,200
To record underapplied overhead to cost of goods sold.
3. Revised Balance as at December 31, 2017:
Debit Credit
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 45,600
Work in process inventory 0
Finished goods inventory 223,200
Prepaid rent 3,000
Accounts payable $17,000
Factory payroll payable 65,400
Notes payable 25,000
Common stock 50,000
Retained earnings 271,000
Sales 373,000
Cost of goods sold 227,200
Factory overhead 0
Operating expenses 60,000
Totals $804,000 $801,400
4. Income Statement for the year ended December 31, 2017
Sales 373,000
Cost of goods sold 227,200
Operating expenses 60,000 287,200
Net Income 85,800
Retained Earnings 271,000
Net income 85,800
Retained earnings 356,800
Balance Sheet as of December 31, 2017:
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 45,600
Work in process inventory 0
Finished goods inventory 223,200
Prepaid rent 3,000 $516,800
Accounts payable $17,000
Factory payroll payable 65,400
Notes payable 25,000
Total liabilities 107,400
Common stock 50,000
Retained earnings 356,800 406,800
Total Liabilities and equity 514,200
5. Assume that the $5,600 on materials requisition 21-3012 should have been direct materials charged to Job 404. Without providing specific calculations, describe the impact of this error on the income statement for 2017 and the balance sheet at December 31, 2017
If the $5,600 were direct materials instead of indirect materials, it would not be expensed in the income statement, through Cost of Goods Sold. Instead, it would be carried forward as Finished Goods Inventory in the Balance Sheet.
Explanation:
a) Data and Calculations:
Trial Balance as at December 31, 2017:
Debit Credit
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 80,000
Work in process inventory 0
Finished goods inventory 15,000
Prepaid rent 3,000
Accounts payable $17,000
Notes payable 25,000
Common stock 50,000
Retained earnings 271,000
Sales 373,000
Cost of goods sold 218,000
Factory overhead 115,000
Operating expenses 60,000
Totals $736,000 $736,000
Raw materials inventory
Account Titles Debit Credit
Balance 80,000
Work in Process (Job 402) 10,200
Work in Process (Job 404) 18,600
Factory overhead 5,600
Balance 45,600
Work in process inventory
Account Titles Debit Credit
Balance 0
Raw materials 10,200
Raw materials 18,600
Factory payroll 36,000
Factory payroll 23,800
Overhead 119,600
Finished Goods 208,200
Finished goods inventory
Account Titles Debit Credit
Balance 15,000
WIP 208,200
Balance 223,200
Factory Payroll Payable
Account Titles Debit Credit
WIP ticket 6052 36,000
WIP ticket 6053 23,800
Factory overhead 5,600
Balance 65,400
Cost of goods sold
Account Titles Debit Credit
Balance 218,000
Factory overhead 9,200
Balance 227,200
Factory overhead
Account Titles Debit Credit
Balance 115,000
Raw materials 5,600
Payroll Payable 8,200
Work in Process 119,600
Underapplied:Cost of goods 9,200
