AE 22 Activity 8

Name: _____________________________________ Score: ______________

CPA Corporation uses job order costing. The balance sheet as of September 30, 2022 is shown below:
CPA Corporation
Balance Sheet
As of September 30, 2022

Assets
Current Assets
Cash ₱124,000
Accounts Receivable ₱ 428,000
Less: Allowance for Bad Debts 21,400 406,600
Inventories
Finished Goods ₱76,000
Work in Process 180,000
Raw Materials 98,000 354,000
Prepaid Insurance 18,000 ₱902,600
Property, Plant & Equipment
Land 600,000
Building 1,200,000
Machinery & Equipment 264,000
Furniture & Fixtures 120,000
Total 2,184,000
Less: Accumulated Depreciation 51,300 2,132,700
Other Assets 80,000
Total Assets ₱3,115,300
Liabilities & Shareholders’ Equity
Current Liabilities
Accounts Payable ₱221,600
SSS Contributions Payable 27,000
PhilHealth Contributions Payable 6,200
EC Contributions Payable 500
HDMF Contributions Payable 10,800
Withholding Tax Payable 48,600
Other Accrued Expenses 10,600
Income Tax Payable 27,000 ₱352,300
Long-Term Debt 500,000
Shareholders’ Equity
Share Capital 2,000,000
Share Premium 200,000
Retained Earnings 63,000 2,263,000
Total Liabilities & Shareholders’ Equity ₱3,115,300

Additional Information:
a. The breakdown of the work in process and finished goods are as follows:
Work in Process Finished Goods
Alpha - ₱76,000
Beta ₱120,000 -
Gamma 60,000 -
₱180,000 ₱76,000
b. Accounts payable account is used for trade creditors only. For non-trade vendors, CPA uses other accrued
expenses account.
c. Outstanding prepaid insurance represents 3-month advance premiums covering the period up to December
31, 2022.
d. Depreciation is calculated on straight line basis using the following estimates useful lives:
Building 40 years
Machinery and equipment 10 years
Furniture and equipment 10 years
e. Non-payroll related costs are divided as follows:
Factory Overhead 50%
Selling 30%
Administrative 20%
f. In October, CPA processed new product called Delta. The following transactions occurred:
1. Material purchases, ₱110,000
2. Materials returned to vendor, ₱5,000
3. Materials requisitioned: direct materials, ₱30,000 and indirect materials, ₱3,000. Direct materials will
be used in the following jobs
Beta ₱10,000
 Gamma 12,000
Delta 8,000
4. Direct materials previously issued to be used for Beta was returned to storeroom, ₱4,000
5. Accrual of gross payroll for the month of October, ₱300,000. Deductions and contributions are as
follows:

Employee Employer
Withholding taxes ₱54,000 -
SSS contributions 3% or 9,000 7% or 21,000
PhilHealth contributions 3,100 3,100
EC contributions - 500
HDMF contributions 2% or 6,000 2% or 6,000

6. Distribution of payroll to various divisions:

Direct labor 70%
Indirect labor 10%
Sales salaries and commissions 15%
Administration 5%
Direct labor is allocated to the following jobs: Beta-30%; Gamma-50%, and Delta-20%
7. Payment of payroll for the month
8. Accrual of employer contributions for October payroll, shared among the following:
Factory overhead 80%
Sales salaries and commissions 15%
Administration 5%
9. Payment of withholding taxes payable, employee and employer contributions relating to prior month's
payroll to various agencies
10. Prepaid insurance amortization
11. Depreciation of property, plant and equipment
12. Other overhead and expenses incurred, ₱56,000
13. Doubtful accounts, ₱4,000
14. Payment of the following: accounts payable, ₱80,000 and other accrued expenses, ₱22,000.
15. Factory overhead applied based on machine hours at a rate of ₱30 per hour. A total of 2,200 machine
hours were utilized in October for the following jobs:
Beta 600 hours
Gamma 1,100 hours
Delta 500 hours
16. Over or underapplied overhead were closed to cost of goods sold.
17. Transfer of completed job Beta to finished goods.
18. Collection of accounts receivable, ₱290,000.
19. Sales of the following at 60% gross margin
Sales Cost Gross
Margin
Alpha 125,000 76,000 49,000
Beta 175,000 104,000 71,000
Total 300,000 180,000 120,000
20. Transfer from finished goods to cost of goods sold.

Required:
A. Journal entries to record the above transactions
B. Statement of cost of goods manufactured for the month ended October 31, 2022
C. Income statement for the month ended October 31, 2022
D. Balance sheet as of October 31, 2022