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Solutions Manual, Appendix 3A 41
Problem 3-17 (60 minutes)
1. and 2.
Cash
A
ccounts Receivable
Bal. 63,000 (m) 785,000 Bal. 102,000 (l) 850,000
Raw Materials Prepaid Insurance
g
Videos in Process Finished Goods
Bal. 45,000 (
j
) 550,000 Bal. 81,000 (k) 600,000
(b) 170,000 (
j
) 550,000
Studio and Equipment
A
ccumulated Depreciation
Bal. 730,000 Bal. 210,000
Studio Overhead Depreciation Expense
(b) 30,000 * (i) 290,000 (d) 21,000
g
Bal. 9,400 (
g
) 1,400
A
dvertisin
g
Expense Miscellaneous Expense
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42 Managerial Accounting, 16th Edition
Problem 3-17 (continued)
A
dministrative Salaries Expense Sales
Cost of Goods Sold
A
ccounts Payable
(k) 600,000 (n) 9,400 (m) 500,000 Bal. 160,000
(a) 185,000
Salaries & Wa
g
es Payable
(m) 285,000 (f) 287,000
Capital Stock Retained Earnin
s
3. Overhead is overapplied for the year by $9,400. Entry (n) above records
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Solutions Manual, Appendix 3A 43
Problem 3-17 (continued)
4.
Supreme Videos, Inc.
Schedule of Cost of Goods Manufactured
Direct materials:
Be
g
innin
g
raw materials inventory……….. $ 30,000
Purchases of raw materials ………………… 185,000
T
Manufacturin
g
overhead applied to work in
process …………………………………………. 290,000
T
otal manufacturin
g
costs ……………………. 542,000
A
g
g
g
5.
Supreme Videos, Inc.
Schedule of Cost of Goods Sold
Be
g
innin
g
finished
g
oods inventory……… $ 81,000
A
dd: Cost of
g
oods manufactured……….. 550,000
Cost of
g
oods available for sale ………….. 631,000
A
j
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44 Managerial Accounting, 16th Edition
Problem 3-17 (continued)
6.
Supreme Videos, Inc.
Income Statement
For the Year Ended December 31
Sales ………………………………………………… $925,000
Cost of
g
oods sold ($600,000
–
$9,400) …… 590,600
Gross mar
g
in ……………………………………… 334,400
Sellin
g
and administrative expenses:
A
A
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Solutions Manual, Appendix 3A 45
Case 3-18 (45 minutes)
1. Shaving 5% off the estimated direct labor-hours in the predetermined
overhead rate will result in an artificially high overhead rate. The artifi-
cially high predetermined overhead rate is likely to result in overapplied
2. This question may generate lively debate. Where should Terri Ronsin’s
loyalties lie? Is she working for the general manager of the division or
While individuals can certainly disagree about what Terri should do,
some of the facts are indisputable. First, understating direct labor-hours
artificially inflates the overhead rate. This has the effect of inflating the
Cost of Goods Sold in all months prior to December and overstating the
While Terri is in an extremely difficult position, her responsibilities under
the IMA’s Statement of Ethical Professional Practice seem to be clear.
The Credibility Standard states that management accountants have a re-
sponsibility to “disclose all relevant information that could reasonably be
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46 Managerial Accounting, 16th Edition
Case 3-18 (continued)
In the actual situation that this case is based on, the corporate control-
ler’s staff were aware of the general manager’s accounting tricks, but
top management of the company supported the general manager be-
cause “he comes through with the results” and could be relied on to hit
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Solutions Manual, Appendix 3A 47
Appendix 3A
Job-Order Costing: A Microsoft Excel-Based Approach
Exercise 3A-1 (20 minutes)
The transactions are recorded as follows:
Transaction Cash
Raw
Materials
Work
in
Process
Finished
Goods
Manufacturing
Overhead
Retained
Earnings
a. $(56,000) $56,000 =
b. $(40,000) $40,000 =
c. $35,000 $(35,000) =
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48 Managerial Accounting, 16th Edition
Exercise 3A-2 (20 minutes)
The transactions are recorded as follows:
Transaction
Work
in
Process
Manufacturing
Overhead
Prepaid
Expenses
PP&E
(net)
Accounts
Payable
Retained
Earnings
a. $80,000 = $80,000
b. $28,000 $(35,000) = $(7,000)
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Solutions Manual, Appendix 3A 49
Exercise 3A-3 (20 minutes)
The transactions are recorded as follows:
Retained Earnin
s
T
ransaction
Y
es No
a. √
b. √
c. $(45,000)
d. $(21,000)
g
j