Refer to the data in Exercise 3-25A. Smith’s accountant found an error in the expense records from the year reported. Depreciation on manufacturing plant and equipment was actually $364,000, not the $480,000 that had originally been reported. The unadjusted Cost of Goods Sold balance at year-end was $610,000.

In Exercise 3-25A

Manufacturing overhead costs ………………………………………………… $ 630,000

Direct labor cost ………………………………………………………………….. $1,650,000

Machine hours ………………………………………………………………………….. 90,000

At the end of the year, the company had actually incurred the following:

Direct labor cost …………………………………………………………………. $1,230,000

Depreciation on manufacturing plant and equipment ………………… $ 480,000

Property taxes on plant …………………………………………………………… $ 19,500

Sales salaries ………………………………………………………………………… $ 26,500

Delivery drivers’ wages …………………………………………………………… $ 17,000

Plant janitors’ wages ………………………………………………………………… $ 8,500

Machine hours …………………………………………………………………. 56,500 hours

Requirements

1. Prepare the journal entry (entries) to record manufacturing overhead costs incurred.

2. Prepare the journal entry to record the manufacturing overhead allocated to jobs in production.

3. Use a T-account to determine whether manufacturing overhead is under-allocated or over-allocated and by how much.

4. Record the entry to close out the under-allocated or over-allocated manufacturing overhead.

5. What is the adjusted ending balance of Cost of Goods Sold?



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