2. The following selected account balances are taken from the books of Paradise company as of January 1 of the most recent year:
Cash (debit)=12000
Work in process(debit)=40,000
Accounts payable(credit)=75000
Sales=?
Accounts Receivable(debit)=100,000
Finished goods(debit) =100,000
Salaries and wages payable( debit)=12000
Cost of goods sold=?
Prepaid Insurance(debit)=8000
Accumulated Depreciation(credit)=120,000
Raw materials( debit)=30,000
Manufacturing overhead=?
The following data relate to the activities of Paradise company during the year:
1. Raw materials purchased on account ,=150,000
2. Raw materials issued to production=145,000(all direct materials)
3. Advertising cost incurred for the year =50,000(credit account payable)
4. Utilities cost incurred for the factory =35,000(credit account payable)
5. Salaries & wages cost incurred direct labor,$250,000 (30,000 hours): indirect labor ,$75,000; selling and administrative ,$140,000.
7. other factory overhead costs incurred for the year ,$30,000(credit account payable)
8. Other selling and administrative expenses incurred for the year ,$25,000(credit accounts payable )
9. Prepaid insurance of$4,000 expired during the year ;all of this related to the factory.
10. The company applies overhead on the basis of direct labor hours at $5.50 per hour .
11.the cost of goods manufactured for the year totaled $550,000.
12. Goods that cost $540,000 according to their job cost sheets were sold on account for $800,000.
13. collections on account from customers during the year totaled $790,000
14. Cash disbursed durind the year : on accounts payable ,$ 300,000 for salary and wages$460,000
Required:
1. Post the above entries directly to Paradise company T-accounts on the previous page. Key your entries with the number 1--14.
2. compute the ending balance in each T-account ?
3. is overhead under applied or over applied for the year? Close the balance to cost of goods sold .(key the entry as #15.)
4. Prepare an income statement for the year?
1.
Cash:
1. Debit Raw Materials $150,000
2. Debit Utilities $35,000
3. Credit Advertising Costs $50,000
4. Debit Accounts Payable $235,000
5. Debit Salaries and Wages $465,000
6. Debit Other Factory Overhead Costs $30,000
7. Credit Accounts Payable $15,000
8. Debit Accounts Payable $25,000
9. Debit Prepaid Insurance $4,000
10. Debit Cost of Goods Sold $825
11. Credit Sales $800,000
12. Debit Accounts Receivable $800,000
13. Debit Cash $790,000
14. Credit Accounts Receivable $790,000
End balance: $7,825
Work in Process:
10. Debit Raw Materials $145,000
End balance: $185,000
Accounts Payable:
1. Credit Raw Materials $150,000
2. Credit Utilities $35,000
3. Debit Advertising Costs $50,000
4. Credit Salaries and Wages $235,000
5. Credit Other Factory Overhead Costs $30,000
6. Debit Other Selling and Admin Expenses $25,000
End balance: $140,000
Sales:
12. Credit Accounts Receivable $800,000
End balance: $800,000
Accounts Receivable:
13. Credit Cash $790,000
End balance: $10,000
Finished Goods:
11. Debit Cost of Goods Manufactured $550,000
End balance: $550,000
Salaries and Wages Payable:
14. Credit Cash $460,000
End balance: $4,000
Cost of Goods Sold:
End balance: $825
Manufacturing Overhead:
End balance: $825
Prepaid Insurance:
9. Credit Prepaid Insurance $4,000
End balance: $4,000
Accumulated Depreciation:
No entries
2. The ending balances are as follows:
Cash: $7,825
Work in Process: $185,000
Accounts Payable: $140,000
Sales: $800,000
Accounts Receivable: $10,000
Finished Goods: $550,000
Salaries and Wages Payable: $4,000
Cost of Goods Sold: $825
Manufacturing Overhead: $825
Prepaid Insurance: $4,000
3. Overhead is under applied by $825.
Entry:
15. Debit Manufacturing Overhead $825
Credit Cost of Goods Sold $825
4. Income statement for the year:
Sales: $800,000
Cost of Goods Sold: $550,825
Gross Profit: $249,175
Operating Expenses:
Advertising Costs: $50,000
Utilities: $35,000
Salaries and Wages: $465,000
Other Factory Overhead Costs: $30,000
Other Selling and Admin Expenses: $25,000
Total Operating Expenses: $605,000
Net Income: $-355,825