A company had $7,000 in raw materials on hand.

company purchased on account an additional $60,

(1) ??? $$$
??? $$$

$52,000 in raw materials were requisitioned from

production. These raw materials included $50,000
indirect materials.
(2) ??? $$$
??? $$$
??? $$$

The employee time ticket included $60,000 record

$15,000 for indirect labor.
(3) ??? $$$
??? $$$
??? $$$

(4) Utilities (heat, water and power) $21,000

Rent on factory equipment $16,000
Miscellaneous factory overhead costs $3,000
(5) Accrued property tax $13,000
 Expired insurance $7,000
(6) Depreciation on factory equipment $18,000
Total $78,000

(4)

(5)

(6)

Predetermine overhead rate -$6 per machine hour

Job A 10,000 machine hours
Job B 5,000 machine hours
Overhead cost 15,000×$6=$90,000

(7)

Job A was completed in April.

(11)
 750 goods in Job A were shipped to a customer earning in sales revenue $22
(12)

(13)
als on hand. During the month, the
ditional $60,000 in raw materials.

tioned from the storeroom for use in

ded $50,000 of direct and $2,000 of

0,000 recorded for direct labor and

hour
n sales revenue $225,000.
A company had $7,000 in raw materials on hand.
company purchased on account an additional $60,
(1) Raw Materials 60,000 Raw Materials
Accounts Payable 60,000 60,000

$52,000 in raw materials were requisitioned from

production. These raw materials included $50,000
indirect materials.
(2) Work in process 50,000 Work in process
Manufacturing overhead 2,000 50,000
Raw materials 52,000

The employee time ticket included $60,000 record

$15,000 for indirect labor.
(3) Work in process 60,000 Work in process
Manufacturing overhead 15,000 50,000
Salaries Payable 75,000 60,000

Utilities (heat, water and power) $21,000

Rent on factory equipment $16,000
Miscellaneous factory overhead costs $3,000
Accrued property tax $13,000
 Expired insurance $7,000
Depreciation on factory equipment $18,000
Total $78,000

(4) Manufacturing overhead 40,000 Manufacturing OH

Accounts Payable 40,000 2000
(5) Manufacturing overhead 20,000 15,000
Property tax payable 13,000 40000
Prepaid insurance 7,000 20000
(6) Manufacturing overhead 18,000 18000
Accumulated depreciation 18,000 95000

Prepaid insurance

Predetermine overhead rate -$6 per machine hour

Job A 10,000 machine hours
Job B 5,000 machine hours
Overhead cost 15,000×$6=$90,000

(7) Work in process 90,000 Work in process

Manufacturing overhead 90,000 50,000
60,000
90,000
200,000

Job A was completed in April.

(11) Finished goods 1000 units 158,000 Work in process
Work in process 158,000 50,000
60,000
90,000
 42,000

750 goods in Job A were shipped to a customer earning in sales revenue $22
(12) Accounts receivable 225,000
Sales 225,000
(13) Cost of goods sold 750 units 118,500
Finished goods 118,500
als on hand. During the month, the
ditional $60,000 in raw materials.
Raw Materials Accounts Payable
60,000

tioned from the storeroom for use in

ded $50,000 of direct and $2,000 of

Work in process Manufacturing OH Raw materials

2000 60,000 52,000

0,000 recorded for direct labor and

Work in process Manufacturing OH Salaries Payable

2000 75,000
15,000
Manufacturing OH Accounts Payable Prop. tax payable
40,000 13,000

Prepaid insurance
7,000

hour

Work in process Manufacturing OH

2000
15,000 Manufacturing OH
40,000 2000
20,000 15,000
18,000 40,000
90,000 20,000
5000 18,000
100,000
5,000

Work in process

158,000
n sales revenue $225,000.
 Corporation incurred $30,000 in selling and administrative salary
(8)

Depreciation on office equipment was $7,000

(9)

Advertising was $42,000 and other selling and administrative expenses wer
(10)
tive salary

trative expenses were $8,000

 Corporation incurred $30,000 in selling and administrative salary
(8) Salaries expense 30,000
Salaries payable 30,000

Depreciation on office equipment was $7,000

(9) Depreciation expense 7,000
Accumulated depreciation 7,000

Advertising was $42,000 and other selling and administrative expenses wer
(10) Advertising expenses 42,000
Other S&AE 8,000
Account payable 50,000
tive salary

trative expenses were $8,000

Hogle Corporation is a manufacturer that uses job-order costing. On January 1, the beginning of its fiscal year,

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000

Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000

The company applies overhead cost to jobs on the basis of machine-hours worked. For the
current year, the company’s predetermined overhead rate was based on a cost formula that estimated $450,00

a. Raw materials were purchased on account, $410,000.

b. Raw materials were requisitioned for use in production, $380,000 ($360,000 direct materials and $20,000 in
c. The following costs were accrued for employee services: direct labor, $75,000; indirect labor, $110,000; sale
d. Sales travel costs were $17,000.
e. Utility costs in the factory were $43,000.
f. Advertising costs were $180,000.
g. Depreciation was recorded for the year, $350,000 (80% relates to factory operations, and 20% relates to sel
h. Insurance expired during the year, $10,000 (70% relates to factory operations, and the remaining 30% relat
i. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, th
j. Goods costing $900,000 to manufacture according to their job cost sheets were completed during the year.
k. Goods were sold on account to customers during the year for a total of $1,500,000. The goods cost $870,000

Required:
1. Prepare journal entries to record the preceding transactions.
2. Post the entries in (1) above to T-accounts (don’t forget to enter the beginning balances in the inventory acc
3. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close any b
4. Prepare an income statement for the year.

Solution 1.

a. e.

b. f.

g.
c.

h.

d.
i. k.
P.O.R.

P.O.R*actual activity $0.00

j.

Solution 2.

Solution 3.

Manufacturing overhead is overapplied for the year

Solution 4.

Income statement
Sales revenue 1500000
COGS 850,000
Gross Profit 650,000
Selling and Administrative expenses
Sales commission 90,000
Travel expense 17,000
Insurance expense 3,000
Depreciation 70,000
Salary 200,000
Ads 180,000
Total expense 560,000

Net operating income 90,000

ginning of its fiscal year, the company’s inventory balances were as follows:

a that estimated $450,000 of total manufacturing overhead for an estimated activity level of 75,000 machine-hours. The f

materials and $20,000 indirect materials).

ect labor, $110,000; sales commissions, $90,000; and administrative salaries, $200,000.

s, and 20% relates to selling and administrative activities).

the remaining 30% relates to selling and administrative activities).
emand for its products, the company worked 80,000 machine-hours on all jobs during the year.
pleted during the year.
The goods cost $870,000 to manufacture according to their job cost sheets.

nces in the inventory accounts).

rnal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Do not allocate the balance
 75,000 machine-hours. The following transactions were recorded for the year:

d. Do not allocate the balance between ending inventories and Cost of Goods Sold.
Hogle Corporation is a manufacturer that uses job-order costing. On January 1, the beginning of its fiscal year,

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000

Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000

The company applies overhead cost to jobs on the basis of machine-hours worked. For the
current year, the company’s predetermined overhead rate was based on a cost formula that estimated $450,00

a. Raw materials were purchased on account, $410,000.

b. Raw materials were requisitioned for use in production, $380,000 ($360,000 direct materials and $20,000 in
c. The following costs were accrued for employee services: direct labor, $75,000; indirect labor, $110,000; sale
d. Sales travel costs were $17,000.
e. Utility costs in the factory were $43,000.
f. Advertising costs were $180,000.
g. Depreciation was recorded for the year, $350,000 (80% relates to factory operations, and 20% relates to sel
h. Insurance expired during the year, $10,000 (70% relates to factory operations, and the remaining 30% relat
i. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, th
j. Goods costing $900,000 to manufacture according to their job cost sheets were completed during the year.
k. Goods were sold on account to customers during the year for a total of $1,500,000. The goods cost $870,000

Required:
1. Prepare journal entries to record the preceding transactions.
2. Post the entries in (1) above to T-accounts (don’t forget to enter the beginning balances in the inventory acc
3. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close any b
4. Prepare an income statement for the year.

Solution 1.

a. Raw materials 410,000 e. Manufacturing overhead

Account payable 410,000 Account payable

b. Work in process 360,000 f. Advertising expense

Manufacturing overhead 20,000 Account payable
Raw materials 380,000
g. Depreciation expense
c. Work in process 75,000 Manufacturing overhead
Manufacturing overhead 110,000 Accumulated depreciation
Sales commissions expense 90,000
Administrative salaries expense 200,000 h. Insurance expense
Salaries payable 475,000 Manufacturing overhead
Prepaid insurance
d. Sales travel expense 17,000
Account payable 17,000
i. Estimated total manufacturing overhead cost k. Account receivable
P.O.R. Estimated total amount of allocation base Sales

$450,000.00 COGS
75000 $6.00 per MH Finished goods

P.O.R*actual activity $480,000.00

Work in process 480,000

Manufacturing overhead 480,000

j. Finished goods 900,000

Work in process 900,000

Solution 2.

Raw materials Account payable Account Receivable

b.b 20,000 380,000 410,000 1,500,000
410000 17000
43000
180000 COGS
870,000
50,000 650,000

WIP MOH Salaries payable

b.b 15,000 20000
360000 110000
75000 43000
480000 280000 Insurance expense
900000 7000 480000 3000
30000 20000

Finished goods Acc. Depreciation

b.b 30,000 870,000 350,000
900000

60,000 350,000

Solution 3.

Manufacturing overhead is overapplied for the year

 Manufacturing overhead 20,000 COGS
COGS 20,000 870,000

850,000
Solution 4.

Income statement

Sales 1,500,000
COGS 850,000
Gross margin 650,000

Selling and Adm. Expenses

Sales commisions expense 90,000
Administrative salaries expense 200,000
Sales travel expense 17,000
Advertising expense 180,000
Depreciation expense 70,000
Insurance expense 3,000
560,000

Net operating income 90,000

ginning of its fiscal year, the company’s inventory balances were as follows:

a that estimated $450,000 of total manufacturing overhead for an estimated activity level of 75,000 machine-hours. The f

materials and $20,000 indirect materials).

ect labor, $110,000; sales commissions, $90,000; and administrative salaries, $200,000.

s, and 20% relates to selling and administrative activities).

the remaining 30% relates to selling and administrative activities).
emand for its products, the company worked 80,000 machine-hours on all jobs during the year.
pleted during the year.
The goods cost $870,000 to manufacture according to their job cost sheets.

nces in the inventory accounts).

rnal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Do not allocate the balance

acturing overhead 43,000

count payable 43,000

ising expense 180,000

count payable 180,000

iation expense 70,000

acturing overhead 280,000
cumulated depreciation 350,000

nce expense 3,000

acturing overhead 7,000
epaid insurance 10,000
 t receivable 1,500,000
1,500,000

870,000
nished goods 870,000

Account Receivable Sales SalesTravel Exp

1,500,000 17,000

COGS Sales Com. Expense Adv. Expense

90,000 180,000

Salaries payable Adm Salaries Expense Depr Expense

475,000 200,000 70,000

nsurance expense
COGS
20,000
 75,000 machine-hours. The following transactions were recorded for the year:

d. Do not allocate the balance between ending inventories and Cost of Goods Sold.