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Running Head: FINANCIAL ACCOUNTING 1
FINANCIAL ACCOUNTING 13
Title: FINANCIAL ACCOUNTING
Student’s Name:
Institution:
Exercise 3-23
For each of the following companies, indicate whether job order or process costing is more appropriate
Manufacturer of swimming pool chemicals
Process costing
Manufacturer of custom hot tubs and spas
Job posting
Architectural firm
Job posting
Manufacturer of ceramic tile
Process costing
Producer of yogurt
Process costing
Manufacturer of custom tool sheds
Job posting
Manufacturer of papers clips
Process costing
Engineering consulting firm
Job posting
Manufacturer of balloons
Process costing
Manufacturer of custom emergency rescue vehicles
Process costing
Exercise 3-27
Prime cost= direct labor cost + direct material cost
Total manufacturing cost= Prime cost+ Manufacturing overhead cost
Cost of goods manufactured= Total manufacturing cost + Beginning WIP Inventory- Ending WIP Inventory
Cost of goods sold= Cost of goods manufactured + Beginning Finished Goods Inventory- Ending Finished Goods Inventory
Direct materials used for manufacturing of finished goods
Raw materials inventory, January 1
$133,000
Add: Raw Materials purchase during January
$190,000
Total raw materials inventory available for consumption
$323,000
Less: Raw materials inventory, January 31
$124,000
Raw materials used or consumed during January
$199,000
The prime cost, total manufacturing cost, the cost of goods manufactured for January
Direct raw materials cost (working Note 1)
$199,000
Direct labor Cost
$300,000
Prime cost for January
$499,000
Applied manufactured overhead (60% of direct labor cost)
$180,000
Total manufacturing costs for January
$679,000
Add: Work in process inventory, January 1
$233,000
Less: Work in process inventory, January 31
$251,000
Cost of goods manufactured for January
$661,000
Cost of goods sold for January
Finished goods inventory, January 1
$125,000
Add: Cost of goods manufactured for January
$661,000
Total cost of goods available for sale
$786,000
Less: Finished goods inventory, January 31
$117,000
Cost of goods sold for January
$669,000
The balance in the manufacturing overhead account on January 31
Applied manufacturing overhead cost= 60% of the direct labor cost= 60% × $300,000= $180,000 (Credit)
Actual manufacturing overhead cost= $170,000 (Debit)
Balance in the manufacturing overhead account on January 31= $10,000 (Credit)
Problem 3-42
1. Prepare Twisto Pretzel Company’s schedule of cost of goods manufactured for 20×1.
2. Prepare the company’s schedule of cost of goods sold for 20×1. The company closes overapplied or underapplied overhead into cost of goods sold.
3. Prepare the company’s income statement for 20×1.
Twisto Pretzel Company
Schedule of cost of Goods Manufactured
For the year of 20×1
Particulars
Amount $
Amount $
Direct Materials:
Raw material inventory on 31.12. ×0
10,100
Add: Purchase of raw material
39,000
Raw material available for use
49,100
Deduct: Raw material inventory 31.12. ×1
11,000
Raw material used
38,100
Direct labour
79,000
Manufacturing overhead:
Insurance on factory and equipment
3,600
Indirect material used
4,900
Depreciation on factory equipment
2,100
Property taxes of factory
2,400
Utilities for factory
6,000
Indirect labor
29,000
Depreciation on factory building
3,800
Rental for warehouse to store raw material
3,100
Total actual manufacturing overhead
54,900
Add: over applied overhead
3,100
Overheads applied to work in process
58,000
Total manufacturing
175,000
Add: Work in process inventory on 31.12. ×0
8,100
Subtotal
183,200
Deduct: work in process inventory on 31.12. ×1
8,300
Cost of goods manufactured
174,900
Twisto Pretzel Company
Schedule of cost of goods sold
For the year 20×1
Particulars
Amounts $
Finished goods inventory on 31.12. ×0
14,000
Add: cost of goods manufactured
174,000
Costs of goods available for sale
188,900
Deduct: finished goods inventory on 31.12. ×1
15,400
Cost of goods sold
173,500
Deduct: Over applied manufacturing overhead
3,100
Cost of goods sold(adjust for overapplied overhead)
170,400
Twisto Pretzel Company
Income statement
For the year ended December 31, 20×1
Particulars
Amount $
Amount $
Sales revenue
205,800
Deduct: cost of goods sold
170,400
Gross Margin
35,400
Deduct: Selling and administrative overheads
Selling and administrative overheads
13,800
Utilities for selling and administrative offices
2,500
Other selling and administrative expenses
4,000
Depreciation on card used by sales personnel
1,200
Rental of space for company president’s office
1,700
23,200
Income before taxes
12,200
Deduct: income tax expenses
5,100
Net Income
7,100
Problem 3-50
1. Prepare Huron’s schedule of cost of goods manufacturing for 20×2.
2. Prepare the company’s schedule of cost of goods sold for 20×2. The company closes overapplied or underapplied overhead into cost of goods sold.
3. Prepare the company’s income statement for 20×2.
Huron Corporation
Schedule of cost of goods manufactured
For the year ended December 31,20×2
Particulars
Amount $
Amounts $
Direct material
Raw material inventory, January 1
89,000
Add: Purchase of raw material
731,000
Raw material available
820,000
Less: raw material inventory, December 31
59,000
Raw material used
761,000
Direct labor
474,000
Manufacturing overhead:
Indirect material
45,000
Indirect labor
150,000
Depreciation of factory building
125,000
Depreciation on factory equipment
60,000
Insurance of factory equipment
40,000
Utilities for factory
70,000
Property taxes on factory
90,000
Total manufacturing overhead
580,000
Less: under applied manufacturing overhead
($580,000-$577,500)
2,500
Total manufacturing costs
1,812,500
Add: work in progress inventory, January 1
0
Less: work in progress inventory, December
40,000
Cost of goods manufactured
1,772,500
Huron Corporation
Schedule of cost goods sold
For the year ended December 31, 20×2
Particular
Amounts
Finished goods inventory, January 1
35,000
Add: cost of goods manufactured
1,772,500
Cost of goods available for sale
1,807,500
Less: finished goods inventory, December 31
40,000
Cost of goods sold
1,767,500
Add: under applied manufacturing overhead
($580,000-$577,500)
2,500
Cost of goods sold (adjusted for under applied overhead)
1,770,000
Huron Corporation
Income statement
For the year ended December 31, 20×2
Particulars
Amounts $
sales revenue
2,105,000
Less: cost of goods sold
1,770,000
Gross margin
335,000
Selling and administrative expenses
269,000
Income before taxes
66,000
Income tax Expense
25,000
Net income
41,000
Huron Corporation
Schedule of cost of goods manufactured
For the year ended December 31,20×2
Particulars
Amount $
Amounts $
Direct material
Raw material inventory, January 1
89,000
Add: Purchase of raw material
731,000
Raw material available
820,000
Less: raw material inventory, December 31
59,000
Raw material used
761,000
Direct labor
474,000
Manufacturing overhead:
Indirect material
45,000
Indirect labor
150,000
Depreciation of factory building
125,000
Depreciation on factory equipment
60,000
Insurance of factory equipment
40,000
Utilities for factory
78,000
Property taxes on factory
90,000
Total manufacturing overhead
588,000
Less: under applied manufacturing overhead
($588,000-$580,000)
8,000
Total manufacturing costs
1,815,000
Add: work in progress inventory, January 1
0
Less: work in progress inventory, December
40,000
Cost of goods manufactured
1,775,000
Huron Corporation
Schedule of cost goods sold
For the year ended December 31, 20×2
Particular
Amounts
Finished goods inventory, January 1
35,000
Add: cost of goods manufactured
1,775,000
Cost of goods available for sale
1,810,000
Less: finished goods inventory, December 31
40,000
Cost of goods sold
1,770,000
Add: under applied manufacturing overhead
($580,000-$577,500)
8,000
Cost of goods sold (adjusted for under applied overhead)
1,762,000
Huron Corporation
Income statement
For the year ended December 31, 20×2
Particulars
Amounts $
sales revenue
2,115,000
Less: cost of goods sold
1,762,000
Gross margin
353,000
Selling and administrative expenses
269,000
Income before taxes
84,000
Income tax Expense
25,000
Net income
59,000
References
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge.
Smith, M. (2017). Research methods in accounting. Sage.
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