Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
907
Problem 15-2B (Continued)
Part 2
Revised Factory Overhead account
Ending balance from trial balance …………………………………..
$27,000
Debit
Applied to Jobs 603 and 604 …………………………………………..
(26,000)
Credit
Additional indirect materials …………………………………………..
Debit
Underapplied overhead …………………………………………………..
$ 6,100
Debit
Dec. 31
Cost of Goods Sold ………………………………………………..
Part 3
CAVALLO MFG.
Trial Balance
December 31, 2019
Debit
Credit
$ 64,000
42,000
11,700
51,200
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
908
Problem 15-2B (Continued)
Part 3 (Concluded)
* Raw materials inventory
Balance per trial balance ……………………………………………………….
$26,000
Part 4
CAVALLO MFG.
Income Statement
For Year Ended December 31, 2019
Sales …………………………………………………………………………..
$ 180,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
909
Problem 15-2B (Concluded)
Part 4 (Concluded)
CAVALLO MFG.
Balance Sheet
December 31, 2019
Assets
Cash ……………………………………………………….
$ 64,000
Accounts receivable ……………………………………..
42,000
Inventories
Raw materials inventory …………………………..
$11,700
Work in process inventory …………………………..
Finished goods inventory …………………………..
71,900
Total assets ………………………………………………….
Accounts payable …………………………………………
Notes payable …………………………..…………………..
Common stock ……………………………………………..
30,000
Retained earnings ($87,000 + $23,900) ……………….
Total liabilities and equity …………………………..
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.
910
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 ………………………..
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 …………………..
Total cost ………………….
$92,000
Job No. 491
Materials ……………………
$ 4,000
Overhead …………………..
4,000
Total cost ………………….
$10,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
911
Problem 15-3B (Concluded)
Part 2
a.
Raw Materials Inventory …………………………..…………….
125,000
Accounts Payable …………………………..………………..
125,000
Record materials purchases.
b.
Work in Process Inventory ……………………………………..
80,000
Factory Overhead …………………………………………………..
12,000
Raw Materials Inventory ……………………………………
92,000
Record direct & indirect materials.
c.
Factory Overhead …………………………………………………..
11,000
Cash ………………………………………………………………..
11,000
Record other factory overhead.
d.
Work in Process Inventory ……………………………………..
68,000
Factory Overhead …………………………………………………..
16,000
Cash ………………………………………………………………..
84,000
e.
Work in Process Inventory ……………………………………..
118,000
Factory Overhead ……………………………………………..
118,000
[($8,000 + $25,000 + $26,000) x 200%].
f.
Finished Goods Inventory ………………………………………
233,000
Work in Process Inventory …………………………..
233,000
($54,000 + $87,000 + $92,000).
Record direct & indirect labor.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
Problem 15-3B (Continued)
[continued from prior page]
g.
Accounts Receivable …………………………..…………………
340,000
Sales ………………………………………………………………..
340,000
Record sales on account.
141,000
Finished Goods Inventory …………………………..
141,000
Record cost of sales ($54,000 + $87,000).
Accum. Depreciation—Factory Building ……………
Accum. Depreciation—Factory Equipment ………..
Prepaid Insurance …………………………..………………..
Property Taxes Payable ……………………………………
Record other factory overhead.
i.
Work in Process Inventory ……………………………………..
Factory Overhead ……………………………………………..
[($7,000 + $2,000) x 200%].
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
913
Problem 15-3B (Continued)
Part 3
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
125,000
(b)
92,000
Bal.
33,000
80,000
(f)
233,000
(e)
68,000
(i)
Part 4
Reports of Job Costs*
Work in Process Inventory
Job 488 …………………………………..
$ 41,000
Job 491 …………………………………..
10,000
Balance …………………………………..
$ 51,000
Job 490 …………………………………..
$ 92,000
Balance …………………………………..
$ 92,000
Job 487 …………………………………..
$ 54,000
Job 489 …………………………………..
Balance …………………………………..
$141,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
914
Problem 15-4B (35 minutes)
Part 1
a. Predetermined overhead rate
b. Overhead costs charged to jobs
Direct
Applied
Job No.
Labor
Overhead (50%)
625 ……………………………………………………….
$ 354,000
$177,000
626 ……………………………………………………….
627 ……………………………………………………….
628 ……………………………………………………….
629 ……………………………………………………….
630 ……………………………………………………….
c. Overapplied or underapplied overhead determination
Actual overhead cost………………………………………………………
$725,000
Less applied overhead cost …………………………………………….
Overapplied overhead …………………………………………………….
$ (11,500)
Part 2
Dec. 31
Factory Overhead …………………………………………………..
11,500
Cost of Goods Sold …………………………………………..
11,500
To assign overapplied overhead.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
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
25,600
40,000
28,000
93,600
25,600
40,000
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
#11–20
32,000
#226
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
916
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
270
200
54,000
16,000
190
200
38,000
150
200
30,000
MATERIALS LEDGER CARD
Item
Material R
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
80
160
12,800
150
160
24,000
90
160
14,400
60
160
MATERIALS LEDGER CARD
Item
Paint
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
44
72
32
72
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
917
Problem 15-5B (Continued)
GENERAL JOURNAL
a.
Raw Materials Inventory …………………………………………
41,200
Accounts Payable …………………………………………….
41,200
Record materials purchases ($30,000+$11,200).
d.
72,000
Factory Overhead ………………………………………………….
12,000
Cash ………………………………………………………………..
84,000
*($40,000 + $32,000)
Factory Overhead ………………………………………………….
36,800
Cash ………………………………………………………………..
36,800
Record other factory overhead.
e.
Finished Goods Inventory ……………………………………..
93,600
Work in Process Inventory ……………………………….
93,600
Record completion of jobs.
f.
Accounts Receivable ……………………………………………..
290,000
Sales ………………………………………………………………..
290,000
Record sales on account.
93,600
Finished Goods Inventory ………………………………..
93,600
Record cost of sales.
38,400
Factory Overhead ………………………………………………….
Raw Materials Inventory …………………………..……….
39,264
*($16,000 + $8,000 + $9,600 + $4,800)
i.
Work in Process Inventory …………………………………….
50,400
Factory Overhead …………………………………………….
50,400
Apply overhead ($28,000 + $22,400).
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
Problem 15-5B (Continued)
j. The ending balance in Factory Overhead is computed as:
Actual Factory Overhead
Miscellaneous overhead …………..
$36,800
Indirect labor …………………………...
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
SERIAL PROBLEM — SP 15
Serial Problem—SP 15, Business Solutions (40 minutes)
1. The cost of direct materials requisitioned in the month equals the total
direct materials costs accumulated on the three jobs less the amount of
2. Direct labor cost incurred in the month equals the total direct labor
costs accumulated on the three jobs less the amount of direct labor cost
3. The predetermined overhead rate equals the ratio between the amount
of overhead assigned to the jobs divided by the amount of direct labor
cost assigned to them. Since the rate is assumed constant during the
Overhead ……………………………………………………..
Predetermined overhead rate ………………………..
4. The cost transferred to finished goods in June equals the total costs of
the two completed jobs for the month, which are Jobs 602 and 603:
Job 602
Job 603
Total
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
Accounting Analysis — AA 15-1
1. Actual inventory changes and operating cash flow effects as found on
the cash flow statement (amounts are in $millions)
Apple
Year Ending
Sept. 30, 2017
Year Ending
Sept. 24, 2016
Inventory change ………………………..
Increase
Decrease
2. A successful JIT system should reduce inventory levels (a). This
reduction in inventory should increase operating cash flows (b). In the
solution of part 1, notice that decreases in inventory yield increases in
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
921
Comparative Analysis — AA 15-2
1.
Apple ($millions)
Year Ended
Sept. 30, 2017
Year Ended
Sept. 24, 2016
Gross margin …………………………..
$88,186
$84,263
2.
Google ($millions)
Year Ended
Dec. 31, 2017
Year Ended
Dec. 31, 2016
3. For both Apple and Google, gross margin ratios decreased in fiscal-year
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
922
Global Analysis — AA 15-3
1.
APPLE
As of Sept. 30,
2017
SAMSUNG
As of Dec. 31
2017
Inventory …………………………..
$4,855*
₩24,983,355**
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
923
Ethics Challenge — BTN 15-1
Instructor note: This problem is designed to illustrate why the accounting professional
must be aware of management’s and employees’ biases when working with and relying
on accounting estimates and data.
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Suggested content outline
The obvious concern is that management is allocating more overhead to
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
Communicating in Practice — BTN 15-2
Student notes should include but not be limited to the following points:
1. You recommend replacing the general accounting (periodic inventory)
system with a cost accounting (perpetual inventory) system—
specifically a job order cost accounting system. Cost accounting
2. This new system would require use of many different documents to
control the acquisition, use, and availability of materials. It also requires
3. The focal point of the new system is the job cost sheet, which is used to
accumulate and tally costs of goods as produced for each specific job
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
Taking It to the Net — BTN 15-3
Instructor note: There is no single solution to this assignment.
to users. After careful examination, students can write a report to the CEO,
which may include the following points:
Teamwork in Action — BTN 15-4
1. A medical clinic can be considered as appropriate for a job order cost
accounting system. This is because each patient is unique in many
2. In light of the differences identified in part 1, the doctors will consider
the individual characteristics of every patient in determining the type
and extent of treatment to be provided, the extent of counseling
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 15
Entrepreneurial Decision — BTN 15-5
1. A job cost sheet for a service company would likely not contain many
costs for direct materials. Often, service providers simply include
2. Examples of direct labor and overhead costs for Brennan Agranoff
include:
Hitting the Road — BTN 15-6
1. The framework for the job cost sheet should follow that in the third
exhibit in the chapter. This includes the descriptions for: company
2. Results of the comparison of job cost sheets to a builder’s actual job
cost sheets depend on the builder chosen and the format used.