PROBLEM 4

6. Materials in RIP, beg (45,000-21,000) 24,000

Purchases 374,000

Materials in RIP, end (56,000-21,000) (35,000)

Backflushed amount 363,000

7. Purchases 363,000

Direct labor 450,000

Applied FOH 320,000

Total manufacturing costs 1,133,000

Underapplied FOH 474,000

COGS 1,607,000

8. Suspense accounts are used when the trial balance is off balance or when you have an unexplained transaction.
The suspense account is a general ledger account that serves as a holding account before the mistake is found or
the transaction is uncertain. You should open one suspense account while operating with the trial balance to keep
all of the inconsistencies before you find them. However, suspense accounts are temporary accounts that must be
closed by the end of your accounting cycle. The suspense account is known as a current asset, since it is most
commonly used to store payments linked to receivable accounts. It is also possible to provide a suspense account
of responsibility, to include the accounts payable whose disposition is still being determined. If so, the suspense
Liability account would be listed as a current liability. All suspense account items should be eliminated by the end
of the fiscal year. Otherwise, a company is issuing financial statements that contain unidentified transactions, and
which are therefore incorrect.