solved: Heavenly Displays Inc puts together large scale

fireworks displays primarily for Canada

solved: Heavenly Displays Inc puts together large scale fireworks displays primarily for Canada
Heavenly Displays Inc. puts together large-scale fireworks displays—primarily for Canada Day
celebrations sponsored by corporations and municipalities. The company assembles and
orchestrates complex disp
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together-large-scale-fireworks-displays-primarily-for-canada
solved: Heavenly Displays Inc puts together large scale fireworks displays primarily for Canada
Heavenly Displays Inc. puts together large-scale fireworks displays—primarily for Canada Day
celebrations sponsored by corporations and municipalities. The company assembles and
orchestrates complex displays using pyrotechnic components purchased from suppliers
through- out the world. The company has built a reputation for safety and for the awesome
power and brilliance of its computer-controlled shows. Heavenly Displays builds its own launch
plat- forms and its own electronic controls. Because of the company’s reputation, customers
order shows up to a year in advance. Since each show is different in terms of duration and
components used, Heavenly Displays uses a job-order costing system. Heavenly Displays’ trial
balance as of January 1, the beginning of the current year, is given below:The company
charges manufacturing overhead costs to jobs on the basis of direct labour- hours. (Each
customer order for a complete fireworks display is a separate job.) Management estimated that
the company would incur $135,000 in manufacturing overhead costs in the fabrication and
electronics shops and would work 18,000 direct labour-hours during the year. The following
transactions occurred during the year:a. Raw materials, consisting mostly of skyrockets, mortar
bombs, flares, wiring, and electronic components, were purchased on account: $820,000.b.
Raw materials were issued to production: $830,000 ($13,000 of this amount was for indirect
materials, and the remainder was for direct materials).c. Fabrication and electronics shop
payrolls were accrued: $200,000 (70% direct labour and 30% indirect labour). A total of 20,800
direct labour-hours were worked during the year.d. Selling and administrative salaries were
accrued: $150,000.e. The company prepaid additional insurance premiums of $38,000 during
the year. Prepaid insurance expiring during the year was $40,000 (only $600 relates to selling
and administrative; the other $39,400 relates to the fabrication and electronics shops because
of the safety hazards involved in handling fireworks).f. Marketing cost was incurred: $100,000.g.
Depreciation charges for the year totalled $40,000 (70% relates to fabrication and electronics
shop assets, and 30% relates to selling and administrative assets).h. Property taxes were
accrued on the shop buildings: $12,600 (credit Accounts Payable).i. Manufacturing overhead
cost was applied to jobs.j. Jobs completed during the year had a total production cost of
$1,106,000 according to their job cost sheets.k. Revenue (all on account) was $1,420,000. Cost
of Goods Sold (before any adjustment for underapplied or overapplied overhead) was
$1,120,000.l. Cash collections on account from customers totalled $1,415,000.m. Cash
payments on accounts payable totalled $970,000. Cash payments to employees for salaries
and wages totalled $348,000.Required:1. Prepare journal entries for the year’s transactions.2.
Prepare a T-account for each account in the company’s trial balance, and enter the opening
balances given above. Post your journal entries to the T-accounts. Prepare new T-accounts as
needed. Compute the ending balance in each account.3. Is manufacturing overhead
underapplied or overapplied for the year? Prepare the necessary journal entry to dispose of the
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 balance in the Manufacturing Overhead account.4. Prepare an income statement for the year.
(Do not prepare a statement of cost of goods manufactured; all of the information needed for
the income statement is available in the T-accounts.)View Solution:
solved: Heavenly Displays Inc puts together large scale fireworks displays primarily for Canada
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