PROBLEM SET A
Problem 15-1A (80 minutes)
Part 1 Total manufacturing costs and the costs assigned to each job
306
307
308
April Total
From March
Direct materials ………………….
$ 29,000
$ 35,000
Direct labor ………………….…….
20,000
18,000
Applied overhead* ……….…….
10,000
9,000
59,000
62,000
$ 121,000
For April
Direct materials ………………….
135,000
220,000
$100,000
455,000
Direct labor ……………………….
85,000
150,000
105,000
340,000
Applied overhead* ……….…….
42,500
75,000
52,500
170,000
Total costs added in April ..…….
262,500
445,000
257,500
965,000
Total costs …………………..…….
$321,500
$507,000
$257,500
$1,086,000
*Equals 50% of direct labor cost.
Part 2 Journal entries for April
a.
Raw Materials Inventory …………………………………..…….
500,000
Accounts Payable …………………………………………….
500,000
To record materials purchases.
b.
Work in Process Inventory …………………………..…..…….
455,000
Raw Materials Inventory ……………………………..…….
455,000
To assign direct materials to jobs.
c.
Work in Process Inventory ……………………………….…….
340,000
Cash …………………………………………………………..…….
340,000
To record direct labor.
d.
Factory Overhead …………………………………………….…….
23,000
Cash …………………………………………………………..…….
23,000
To record indirect labor.
e.
Work in Process Inventory …………………………..…..…….
170,000
Factory Overhead ……………………………………….…….
170,000
To apply overhead to jobs.
Problem 15-1A (continued)
f.
[continued from prior page]
Factory Overhead …………………………………………….…….
50,000
Raw Materials Inventory ……………………………..…….
50,000
To record indirect materials.
Factory Overhead …………………………………………….…….
19,000
Cash …………………………………………………………..…….
19,000
To record factory utilities.
Factory Overhead …………………………………………….…….
51,000
Accumulated Depreciation—Factory Equip ……….
51,000
To record other factory overhead.
Factory Overhead …………………………………………….…….
32,000
Cash …………………………………………………………..…….
32,000
To record factory rent.
g.
Finished Goods Inventory (306 & 307) ……………….…….
828,500
Work in Process Inventory …………………………..
828,500
To record jobs completed ($321,500 + $507,000).
h.
Cost of Goods Sold (306) ………………………………….…….
321,500
Finished Goods Inventory …………………………..
321,500
To record cost of sale of job.
i.
Cash ………………………………………………………………..…….
635,000
Sales ………………………………………………………….…….
635,000
To record sale of job.
j.
Cost of Goods Sold ………………………………………….…….
5,000
Factory Overhead* ……………………………………..…….
5,000
To assign underapplied overhead.
*Overhead applied to jobs …..
$170,000
Overhead incurred
Indirect materials………………..….
$50,000
Indirect labor ……………………..….
23,000
Factory rent ……………………….….
32,000
Factory utilities …………………..….
19,000
Factory equip. depreciation. .….
51,000
175,000
Underapplied overhead ………….
$ 5,000
Problem 15–1A (Continued)
Part 3
MARCELINO COMPANY
Schedule of Cost of Goods Manufactured
For Month Ended April 30
Direct materials used ……………………………………………………….
$ 455,000
Direct labor used ………………………………………………………….……..
340,000
Factory overhead applied …………………………………………….……..
170,000
Total manufacturing costs …………………………………………………..
965,000
Add work in process March 31 (Jobs 306 & 307) ………….……..
121,000
Total cost of work in process ……………………………………….……..
1,086,000
Deduct work in process, April 30 (Job 308)…………………..……..
(257,500)
Cost of goods manufactured ………………………………………..……..
$ 828,500
Part 4
Gross profit on the income statement for the month ended April 30
Sales …………………………………………………………………………………………….….
$ 635,000
Cost of goods sold ($321,500 + $5,000) …………………………………………….
(326,500)
Gross profit …………………………..……………………………………………………….
$ 308,500
Presentation of inventories on the April 30 balance sheet
Inventories
Raw materials …………………………………………………………………………………
$ 75,000*
Work in process (Job 308) …………………………………………………………….…
257,500
Finished goods (Job 307) ……………………………………………………………..…
507,000
Total inventories ………………………………………………………………………….…
$ 839,500
* Beginning raw materials inventory ……………….………….
$ 80,000
Purchases ………………………………………………….……
500,000
Direct materials used ………………………………….……………………
(455,000)
Indirect materials used………………………………..……………………..
(50,000)
Ending raw materials inventory …………………………..
$ 75,000
Part 5
Overhead is underapplied by $5,000, meaning that individual jobs or batches of
jobs are under-costed. Thus, profits at the job (and batch) level are overstated.
Problem 15-2A (75 minutes)
Part 1
a.
Dec. 31
Work in Process Inventory ……………………………………..
28,800
Raw Materials Inventory …………………………..
28,800
To record direct materials costs for
Jobs 402 and 404 ($10,200 + 18,600).
b.
Dec. 31
Work in Process Inventory ……………………………………..
59,800
Wages Payable …………………………..…………..………..
59,800
To record direct labor costs for
Jobs 402 and 404 ($36,000 + $23,800).
c.
Dec. 31
Work in Process Inventory ……………………………………..
119,600
Factory Overhead…………………………..……….………..
119,600
To allocate overhead to Jobs 402 and 404
at 200% of direct labor cost assigned.
d.
Dec. 31
Factory Overhead…………………………..…………….………..
5,600
Raw Materials Inventory …………………………..
5,600
To add cost of indirect materials
to actual factory overhead.
e.
Dec. 31
Factory Overhead…………………………..…………….………..
8,200
Wages Payable …………………………..…………..………..
8,200
To accrue indirect labor and assign it to
actual factory overhead.
Dec. 31
Cost of Goods Sold ………………………………………………..
9,200
Factory Overhead…………………………..……….………..
9,200
To close underapplied overhead.
Problem 15-2A (continued)
Part 3
BERGAMO BAY COMPANY
Trial Balance
December 31, 2015
Debit
Credit
Cash ……………………………………………………………………..…
$170,000
Accounts receivable …………………………..…………………..…
75,000
Raw materials inventory* ………………………………………..…
45,600
Work in process inventory** ………………………………………
208,200
Finished goods inventory …………………………………………
15,000
Prepaid rent …………………………………………………………..…
3,000
Accounts payable ………………………………………………….…
$ 17,000
Wages payable ……………………………………………………….
Notes payable ………………………………………………………..…
68,000
25,000
Common stock ……………………………………………………….
50,000
Retained earnings ………………………………………………….…
271,000
Sales ……………………………………………………………………..…
373,000
Cost of goods sold ($218,000 + $9,200) ………………………..…
227,200
Factory overhead …………………………..……………………….…
0
Operating expenses………………………………………………..…
60,000
_______
Totals …………………………………………………………………….…
$804,000
$804,000
Problem 15-2A (continued)
Part 4
BERGAMO BAY COMPANY
Income Statement
For Year Ended December 31, 2015
Sales …………………………..………………………………………………….……
$373,000
Cost of goods sold ………………………………………………………….……
(227,200)
Gross profit …………………………………………………………………….……
145,800
Operating expenses ………………………………………………………..……
(60,000)
Net income ……………………………………………………….…………….……
$ 85,800
BERGAMO BAY COMPANY
Balance Sheet
December 31, 2015
Assets
Cash ………………………………………………………………..…………
$170,000
Accounts receivable ……………………………………………………
75,000
Inventories
Raw materials inventory …………………………..…………………
$ 45,600
Work in process inventory ……………………………….…………
208,200
Finished goods inventory ………………………………..…………
15,000
268,800
Prepaid rent …………………………..…………………………..
3,000
Total assets ……………………………………………………....
$516,800
Liabilities and equity
Accounts payable …………………………………………….…………
$ 17,000
Wages payable ……………………………………………………….
Notes payable …………………………………………………..…..
68,000
25,000
Total liabilities ………………………………………………….……
110,000
Common stock ……………………………………………………….
50,000
Retained earnings ($271,000 + $85,800) ……………….…………
356,800
Total stockholders’ equity ……………………………………………
406,800
Total liabilities and equity ……………………………………………
$516,800
Problem 15-2A (concluded)
Part 5
This $5,600 error would cause the costs for Job 404 to be understated.
Since Job 404 is in process at the end of the period, work in process
Problem 15-3A (70 minutes)
Part 1
JOB COST SHEETS
Job No. 136
Job No. 138
Materials …………..
$ 48,000
Materials …………..
$ 19,200
Labor …………..…..
12,000
Labor………………..
37,500
Overhead ……..…..
24,000
Overhead ……..…..
75,000
Total cost …….…..
$ 84,000
Total cost …….…..
$131,700
Job No. 137
Job No. 139
Materials …………..
$ 32,000
Materials …………..
$ 22,400
Labor …………..…..
10,500
Labor………………..
39,000
Overhead ……..…..
21,000
Overhead ……..…..
78,000
Total cost …….…..
$ 63,500
Total cost …….…..
$139,400
Job No. 140
Materials …………..
$ 6,400
Labor………………..
3,000
Overhead ……..…..
6,000
Total cost …….…..
$ 15,400
Part 2
a.
Raw Materials Inventory …………………………………..…….
200,000
Accounts Payable …………………………………………….
200,000
To record materials purchases.
b.
Work in Process Inventory …………………………..…..…….
128,000
Factory Overhead …………………………………………….…….
19,500
Raw Materials Inventory ……………………………..…….
147,500
To record direct & indirect materials.
c.
Factory Overhead …………………………………………….…….
15,000
Cash …………………………………………………………..…….
15,000
To record other factory overhead.
Problem 15-3A (Continued)
[continued from prior page]
d.
Work in Process Inventory …………………………..…..…….
102,000
Factory Overhead …………………………………………….…….
24,000
Cash …………………………………………………………..…….
126,000
To record direct & indirect labor.
e.
Work in Process Inventory …………………………..…..…….
177,000
Factory Overhead ……………………………………….…….
177,000
To apply overhead to jobs
[($12,000 + $37,500 + $39,000) x 200%].
f.
Finished Goods Inventory ………………………………..…….
355,100
Work in Process Inventory …………………………..
355,100
To record completion of jobs
($84,000 + $131,700 + $139,400).
g.
Accounts Receivable ……………………………………….…….
525,000
Sales ………………………………………………………….…….
525,000
To record sales on account.
Cost of Goods Sold ………………………………………….…….
215,700
Finished Goods Inventory …………………………..
215,700
To record cost of sales ($84,000 + $131,700).
h.
Factory Overhead …………………………………………….…….
149,500
Accum. Depreciation—Factory Building…………….
68,000
Accum. Depreciation—Factory Equipment ….…….
36,500
Prepaid Insurance …………………………..………….…….
10,000
Property Taxes Payable …………………………………….
35,000
To record other factory overhead.
i.
Work in Process Inventory …………………………..…..…….
27,000
Factory Overhead ……………………………………….…….
27,000
To apply overhead to jobs
[($10,500 + $3,000) x 200%].
Problem 15–3A (Continued)
Part 3
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
200,000
(b)
147,500
Bal.
52,500
Work in Process Inventory
Factory Overhead
(b)
128,000
(f)
355,100
(b)
19,500
(e)
177,000
(d)
102,000
(c)
15,000
(i)
27,000
(e)
177,000
(d)
24,000
(i)
27,000
(h)
149,500
Bal.
78,900
Bal.
4,000
Finished Goods Inventory
Cost of Goods Sold
(f)
355,100
(g)
215,700
(g)
215,700
Bal.
139,400
Bal.
215,700
Part 4
Reports of Job Costs*
Work in Process Inventory
Job 137 …………………………….……
$ 63,500
Job 140 …………………………….……
15,400
Balance …………………………....……
$ 78,900
Finished Goods Inventory
Job 139 …………………………….……
$139,400
Balance …………………………....……
$139,400
Cost of Goods Sold
Job 136 …………………………….……
$ 84,000
Job 138 …………………………….……
131,700
Balance …………………………....……
$215,700
*Individual totals reconcile with account balances in part 3.