Ac 505 Case Study 1 Essay

700 Words 3 Pages
Sovereign Millwork, Ltd., produces reproductions of antique residential moldings at a plant located in Manchester, England. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company's fiscal year, inventory account balances were as follows: Raw Materials | £10,000 | Work in Process | £4,000 | Finished Goods | £8,000 |
The company applies overhead cost to jobs on the basis of machine-hours. Its predetermined overhead rate for the fiscal year starting July 1 was based on a cost formula that estimated £99,000 of manufacturing overhead for an estimated activity level of 45,000 machine-hours. During the year, the following transactions
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Prepare journal entries to record the transactions for the year. * 2. Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account. * 3. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. * 4. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

1. a) Raw Materials 160,00 Accounts Payable 160,000

b) Work in Process 120,000 Manufacturing Overhead 20,000 Raw Materials 140,000

c) Work in Process 90,000 Manufacturing Overhead 60,000 Sales Commissions Expense 20,000 Administrative Salaries Expense 50,000 Salaries and Wages Payable 220,000

d) Manufacturing Overhead 13,000 Insurance Expense 5,000 Prepaid Insurance 18,000

e) Manufacturing Overhead 10,000 Accounts Payable 10,000

f) Advertising Expense 15,000 Accounts Payable 15,000

g) Manufacturing Overhead 20,000 Depreciation Expense 5,000 Accumulated

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