Question

P2-14R Review Problem for Chapters 1 and 2 Lift It, Inc.,manufactures chain hoists. The raw materials inventories on hand onOctober 1 were as follows: Chain . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000pounds, \$24,000 Pulleys . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 4,000 sets, \$20,000 Boltsand taps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 10,000 pounds, \$5,000 Steel plates . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000units, \$2,000 The balances in the ledger accounts on October 1 wereas follows: Cash . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . \$ 12,000 Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 35,000 Materials . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 51,000 Prepaid insurance . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 125,000 Accumulated depreciation—machinery .. . . . . . . . . . . . \$ 10,500 Office equipment . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 30,000Accumulated depreciation—office equipment . . . . . . . 4,800Office furniture . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 20,000 Accumulated depreciation—officefurniture . . . . . . . . . 2,500 Accounts payable . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Capitalstock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 182,200 Retained earnings . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 46,000 \$276,000 \$276,000Transactions during October were as follows: a. Payroll recordedduring the month: direct labor, \$28,000; indirect labor, \$3,000. b.Factory supplies purchased for cash, \$1,000. (Use a separateinventory account, Factory Supplies.) c. Materials purchased onaccount: chain—4,000 pounds, \$8,800; pulleys—2,000 sets, \$10,200;steel plates—5,000 units, \$3,000. d. Sales on account for themonth, \$126,375. e. Accounts receivable collected, \$72,500. f.Materials used during October (FIFO costing): chain, 14,000 pounds;pulleys, 4,400 sets; bolts and taps, 4,000 pounds; steel plates,3,800 units. g. Payroll paid, \$31,000. h. Factory supplies on hand,October 31, \$350. i. Factory heat, light, and power costs forOctober, \$3,000 (not yet paid). j. Office salaries paid, \$6,000. k.Advertising paid, \$2,000. l. Factory superintendence paid, \$1,800.m. Expired insurance—on office equipment, \$100; on factorymachinery, \$300. n. Factory rent paid, \$2,000. o. Depreciation onoffice equipment, \$400; on office furniture, \$180; on machinery,\$1,200. p. Factory overhead charged to jobs, \$11,950. q. Work inProcess, October 31, \$31,000. (Hint: The difference between the sumof the beginning balance in Work in Process plus the total chargesto it during the period less the ending balance in Work in Processrepresents the cost of the goods completed during the period.) r.Cost of goods sold during the month, \$84,250. s. Accounts payablepaid, \$33,750. Required: 1. Set up T-accounts and enter thebalances as of October 1. 2. Prepare journal entries to record eachof the previous transactions. 3. Post the journal entries to theaccounts, setting up any new ledger accounts necessary. Onlycontrolling accounts are to be maintained; however, show thecalculation for the cost of materials used. 4. Prepare a statementof cost of goods manufactured for October. 5. Prepare an incomestatement. 6. Prepare a balance sheet showing the classificationsof current assets, plant and equipment, current liabilities, andstockholders’ equity. MINI-CASE 1