Problem 15–2B (Continued)
Part 3 (Concluded)
* Raw materials inventory
Balance per trial balance ……………………………………………………….
$26,000
Less: Amounts recorded for Jobs 603 and 604 ………….……………….
(12,200)
Less: Indirect materials …………………………………………….…………
(2,100)
Ending balance ……………………………………………………….…………………..
$11,700
** Work in process inventory
Job 603
Job 604
Total
Direct materials ………….…..
$ 4,600
$ 7,600
$12,200
Direct labor ………………..…..
5,000
8,000
13,000
Overhead………………………..
10,000
26,000
Total cost …………………..…..
$19,600
$31,600
$51,200
*** $105,000 + $6,100 = $111,100
Part 4
CAVALLO MFG.
Income Statement
For Year Ended December 31, 2015
Sales ……………………………………………………………………..……
$ 180,000
Cost of goods sold ………………………………………………….…..
(111,100)
Gross profit …………………………………………………………………
68,900
Operating expenses ………………………………………………..…..
(45,000)
Net income …………………………..………………………………..……
$ 23,900
Problem 15–2B (Concluded)
Part 4 (Concluded)
CAVALLO MFG.
Balance Sheet
December 31, 2015
Assets
Cash ……………………………………………………….
$ 64,000
Accounts receivable ………………………………..……
42,000
Inventories
Raw materials inventory …………………………..
$11,700
Work in process inventory …………………………..
51,200
Finished goods inventory ……………………….….
9,000
71,900
Prepaid rent …………………………………………….……
3,000
Total assets …………………………………………….……
$180,900
Liabilities and equity
Accounts payable …………………………………………
$ 10,500
Wages payable ………………………………………..……
Notes payable …………………………..……………..……
16,000
13,500
Total liabilities ………………………………………………
40,000
Common stock ………………………………………..……
30,000
Retained earnings ($87,000 + $23,900) ………….……
110,900
Total stockholders’ equity ………………………..…
140,900
Total liabilities and equity ………………………..…
$180,900
Part 5
The $2,100 error would cause the costs for Job 604 to be understated.
Since Job 604 is in process at the end of the period, work in process
inventory and total assets would both be understated on the balance sheet.
In addition the over- or underapplied overhead would change by $2,100.
That is, if overhead is underapplied by, say, $6,100, that amount would
decrease by $2,100, yielding $4,000 in underapplied overhead. Any under–
or overapplied overhead is charged directly to cost of goods sold, so
correcting the error would cause cost of goods sold to decrease and net
income to increase by $2,100—yielding a $2,100 increase in retained
earnings.
Problem 15-3B (70 minutes)
Part 1
JOB COST SHEETS
Job No. 487
Materials ……..…………….
$30,000
Labor…………..…………….
8,000
Overhead …….…………….
16,000
Total cost ………………….
$54,000
Job No. 488
Materials ……..…………….
$20,000
Labor…………..…………….
7,000
Overhead …….…………….
14,000
Total cost ………………….
$41,000
Job No. 489
Materials ……..…………….
$12,000
Labor…………..…………….
25,000
Overhead …….…………….
50,000
Total cost ………………….
$87,000
Job No. 490
Materials ……..…………….
$14,000
Labor…………..…………….
26,000
Overhead …….…………….
52,000
Total cost ………………….
$92,000
Job No. 491
Materials ……..…………….
$ 4,000
Labor…………..…………….
2,000
Overhead …….…………….
4,000
Total cost ………………….
$10,000
Problem 15–3B (Concluded)
Part 2
a.
Raw Materials Inventory ………………………………….……..
125,000
Accounts Payable ……………………………………..……..
125,000
To record materials purchases.
b.
Work in Process Inventory ……………………………………..
80,000
Factory Overhead…………………………..……………….……..
12,000
Raw Materials Inventory …………………………….……..
92,000
To record direct & indirect materials.
c.
Factory Overhead…………………………..……………….……..
11,000
Cash ………………………………………………………………..
11,000
To record other factory overhead.
d.
Work in Process Inventory ……………………………………..
68,000
Factory Overhead…………………………..……………….……..
16,000
Cash ………………………………………………………………..
84,000
To record direct & indirect labor.
e.
Work in Process Inventory ……………………………………..
118,000
Factory Overhead…………………………..………….……..
118,000
To apply overhead to jobs
[($8,000 + $25,000 + $26,000) x 200%].
f.
Finished Goods Inventory ……………………………….……..
233,000
Work in Process Inventory …………………………..
233,000
To record completion of jobs
($54,000 + $87,000 + $92,000).
Problem 15–3B (Continued)
[continued from prior page]
g.
Accounts Receivable ……………………………………………..
340,000
Sales ………………………………………………………………..
340,000
To record sales on account.
Cost of Goods Sold ………………………………………………..
141,000
Finished Goods Inventory …………………………..
141,000
To record cost of sales ($54,000 + $87,000).
h.
Factory Overhead…………………………..……………….……..
96,000
Accum. Depreciation—Factory Building …….……..
37,000
Accum. Depreciation—Factory Equipment ………..
21,000
Prepaid Insurance ……………………………………..……..
7,000
Property Taxes Payable…………………………..………..
31,000
To record other factory overhead.
i.
Work in Process Inventory ……………………………………..
18,000
Factory Overhead…………………………..………….……..
18,000
To apply overhead to jobs
[($7,000 + $2,000) x 200%].
Problem 15–3B (Continued)
Part 3
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
125,000
(b)
92,000
Bal.
33,000
Work in Process Inventory
Factory Overhead
(b)
80,000
(f)
233,000
(b)
12,000
(e)
118,000
(d)
68,000
(c)
11,000
(i)
18,000
(e)
118,000
(d)
16,000
(i)
18,000
(h)
96,000
Bal.
51,000
Bal.
1,000
Finished Goods Inventory
Cost of Goods Sold
(f)
233,000
(g)
141,000
(g)
141,000
Bal.
92,000
Bal.
141,000
Part 4
Reports of Job Costs*
Work in Process Inventory
Job 488 …………………………….…….
$ 41,000
Job 491 …………………………….…….
10,000
Balance …………………………….…….
$ 51,000
Finished Goods Inventory
Job 490 …………………………….…….
$ 92,000
Balance …………………………….…….
$ 92,000
Cost of Goods Sold
Job 487 …………………………….…….
$ 54,000
Job 489 …………………………….…….
87,000
Balance …………………………….…….
$141,000
*Individual totals reconcile with account balances shown in part 3.
Problem 15-4B (35 minutes)
Part 1
a. Predetermined overhead rate
= = = 50%
Estimated overhead costs
Estimated direct labor cost
$750,000 $750,000
[50 x 2,000 x $15] $1,500,000
Problem 15-5B (90 minutes)
JOB COST SHEET
Customer’s Name
Encinita Company
Job No.
450
Direct Materials
Direct Labor
Overhead Costs Applied
Date
Requisition
Number
Amount
Time
Ticket
Number
Amount
Date
Rate
Amount
#223
16,000
#1–10
40,000
June —
70%
28,000
#224
9,600
SUMMARY OF COSTS
Dir. Materials ……..……………………
25,600
Dir. Labor …………..………………
40,000
Overhead …………..………………
28,000
Total Cost of Job …………………………..
93,600
Total
25,600
Total
40,000
FI N I S H E D
JOB COST SHEET
Customer’s Name
Fargo, Inc.
Job No.
451
Direct Materials
Direct Labor
Overhead Costs Applied
Date
Requisition
Number
Amount
Time
Ticket
Number
Amount
Date
Rate
Amount
#225
8,000
#11–20
32,000
June—
70%
22,400
#226
4,800
SUMMARY OF COSTS
Dir. Materials ………..…………………
Dir. Labor ……………..……………
Overhead ……………..……………
______
Total cost of Job …..………………………
.
Total
Total
Problem 15–5B (Continued)
MATERIALS LEDGER CARD
Item
Material M
Received
Issued
Balance
Date
Receiving
Report
Units
Unit
Price
Total
Price
Requi–
sition
Units
Unit
Price
Total
Price
Units
Unit
Price
Total
Price
June 1
120
200
24,000
#20
150
200
30,000
270
200
54,000
#223
80
200
16,000
190
200
38,000
#225
40
200
8,000
150
200
30,000
Item
MATERIALS LEDGER CARD
Item
June 1
3,168
#227
12
864
2,304
Problem 15–5B (Continued)
GENERAL JOURNAL
a.
Raw Materials Inventory ……………………………………..….
41,200
Accounts Payable …………………………………………….
41,200
To record materials purchases ($30,000+$11,200).
d.
Work in Process Inventory* ………………………………..….
72,000
Factory Overhead ………………………………………………….
12,000
Cash …………………………………………………………….….
84,000
To record direct & indirect labor.
*($40,000 + $32,000)
Factory Overhead ………………………………………………….
36,800
Cash …………………………………………………………….….
36,800
To record other factory overhead.
e.
Finished Goods Inventory…………………………………..….
93,600
Work in Process Inventory…………………………....….
93,600
To record completion of jobs.
f.
Accounts Receivable ………………………………………….….
290,000
Sales …………………………………………………………….….
290,000
To record sales on account.
Cost of Goods Sold ……………………………………………….
93,600
Finished Goods Inventory…………………………..…….
93,600
To record cost of sales.
h.
Work in Process Inventory* ………………………………..….
38,400
Factory Overhead ………………………………………………….
864
Raw Materials Inventory ………………………………..….
39,264
To record direct & indirect materials.
*($16,000 + $8,000 + $9,600 + $4,800)
i.
Work in Process Inventory………………………………….….
50,400
Factory Overhead …………………………………………….
50,400
To apply overhead ($28,000 + $22,400).