After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

Farina Bay’s computer system generated the following trial balance on December 31, 2013. The company’s manager knows something is wrong with the trial balance because it does not show any balance for Goods in Process Inventory but does show balances for the Factory Payroll and Factory Overhead accounts.

   

		Debit			Credit
Cash	$	102,000
Accounts receivable		75,000
Raw materials inventory		80,000
Goods in process inventory		0
Finished goods inventory		15,000
Prepaid rent		3,000
Accounts payable				$	17,000
Notes payable					25,000
Common stock					50,000
Retained earnings					271,000
Sales					373,000
Cost of goods sold		218,000
Factory payroll		68,000
Factory overhead		115,000
Operating expenses		60,000
Totals	$	736,000		$	736,000

   

After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

   

Materials requisition 21-3010:		$	10,200	direct materials to Job 402
Materials requisition 21-3011:		$	18,600	direct materials to Job 404
Materials requisition 21-3012:		$	5,600	indirect materials
Labor time ticket 6052:		$	36,000	direct labor to Job 402
Labor time ticket 6053:		$	23,800	direct labor to Job 404
Labor time ticket 6054:		$	8,200	indirect labor

   

Jobs 402 and 404 are the only units in process at year-end. The predetermined overhead rate is 200% of direct labor cost.

a.	Direct materials costs to Goods in Process Inventory.
b.	Direct labor costs to Goods in Process Inventory.
c.	Overhead costs to Goods in Process Inventory.
d.	Indirect materials costs to the Factory Overhead account.
e.	Indirect labor costs to the Factory Overhead account.

Required:
1.	Prepare journal entries to assign the above costs.

Explanation:

a. 

Materials costs to Goods in process inventory : ($10,200 + $18,600) = $28,800

 
b.

Labor costs to Goods in process inventory : ($36,000 + $23,800) = $59,800

2.1

Determine the revised balance of the Factory Overhead account after making the entries in part 1 using T-accounts. Determine whether there is any under- or overapplied overhead for the year.

 

2.2

Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold, assuming the amount is not material.

 

 

Explanation:

2.1 

Revised Factory Overhead account
Ending balance from trial balance	$	115,000			debit
Applied to Jobs 402 and 404		(119,600	)		credit
Additional indirect materials		5,600			debit
Additional indirect labor		8,200			debit
Underapplied overhead	$	9,200			debit

 3.

Prepare a revised trial balance.

 

Explanation:

Raw materials inventory

Balance per trial balance	$	80,000
Less: Amounts recorded for Jobs 402 and 404		(28,800	)
Less: Indirect materials		(5,600	)
Ending balance	$	45,600

   

Goods in process inventory

	Job 402			Job 404				Total
Direct materials	$	10,200		$	18,600		$	28,800
Direct labor		36,000			23,800			59,800
Overhead		72,000			47,600			119,600
Total cost	$	118,200		$	90,000		$	208,200

4.1	Prepare an income statement for year 2013.   Explanation: Retained earnings ($271,000 + $85,800) = $356,800