Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $380,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year (all purchases and services were acquired on account): a. Raw materials purchased for use in production, $275,000.
b. Raw materials requisitioned for use in production (all direct materials), $260,000.
c. Utility bills were incurred, $74,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
d. Salary and wage costs were incurred:

Direct labor (1,100 hours) $305,000
Indirect labor $105,000
Selling and administrative salaries $185,000

e. Maintenance costs were incurred in the factory, $69,000.
f. Advertising costs were incurred, $151,000.
g. Depreciation was recorded for the year, $87,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
h. Rental cost incurred on buildings, $112,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).
i. Manufacturing overhead cost was applied to jobs.
j. Cost of goods manufactured for the year, $920,000.
k. Sales for the year (all on account) totaled $1,950,000. These goods cost $950,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw materials $45,000
Work in process $36,000
Finished Goods $75,000

Required:
a. Prepare journal entries to record the above data.
b. Post your entries to T-accounts.
c. Prepare a schedule of cost of goods manufactured.
d. Prepare an income statement for the year.

Froya Fabrikker A/S of Bergen, Norway

a. Journal Entries

a. Debit Raw materials $275,000

Credit Accounts payable $275,000

To record purchase of raw materials on account.

b. Debit WIP $260,000

Credit Raw materials $260,000

To record materials requisitioned for production.

c. Debit Manufacturing overhead $70,300

Debit Selling and admin. $3,700

Credit Utilities expense $74,000

To close utilities expenses.

d. Debit WIP $305,000

Debit Manufacturing overhead $105,000

Debit Selling and Admin. $185,000

Credit Payroll Expense $595,000

To close payroll expenses.

e. Debit Manufacturing overhead $69,000

Credit Maintenance expense $69,000

To close maintenance expense.

f. Debit Selling and admin. $151,000

Credit Advertising expense $151,000

To close advertising expense.

g. Debit Manufacturing overhead $69,600

Debit Selling and admin. $17,400

Credit Depreciation expense $87,000

To close depreciation expense.

h. Debit Manufacturing overhead $95,200

Debit Selling and admin $16,800

Credit Rent expense $112,000

To close rent expense.

i. Debit WIP $418,000

Credit Manufacturing overhead applied $418,000

To record manufacturing overhead applied to production at $380 for 1,100 direct labor-hours.

j. Debit Finished goods $920,000

Credit WIP $920,000

To transfer completed goods to finished goods inventory.

k. Debit Accounts receivable $1,950,000

Credit Sales revenue $1,950,000

To record sale of goods on account.

Debit Cost of goods sold $950,000

Credit Finished goods $950,000

To record the cost of goods sold.

b. T-accounts

Raw materials

Account Titles           Debit       Credit

Beginning balance $45,000

Accounts payable  275,000

Work in Process                       $260,000

Work in process

Account Titles           Debit       Credit

Beginning balance  $36,000

Raw materials         260,000

Payroll expense      305,000

Manufacturing

overhead applied    418,000

Finished goods inventory      $920,000

Finished Goods

Account Titles           Debit       Credit

Beginning balance  $75,000

Work in Process     920,000

Cost of goods sold                  $950,000

Cost of goods sold

Account Titles           Debit       Credit

Finished goods    $950,000

Accounts Payable

Account Titles           Debit       Credit

Raw materials                        $275,000

Manufacturing overhead

Account Titles          Debit       Credit

Utilities expense  $70,300

Payroll expense   105,000

Maintenance exp  69,000

Depreciation exp. 69,600

Rent expense       95,200

Work in Process                  $418,000

Overhead applied  8,900

Sales Revenue

Account Titles          Debit       Credit

Accounts receivable       $1,950,000

Accounts Receivable

Account Titles          Debit       Credit

Sales revenue    $1950,000

Selling and admin.

Utilities expense    $3,700

Payroll expense   185,000

Advertising exp.   151,000

Depreciation exp.  17,400

Rent expense        16,800

Utilities Expense

Manufacturing overhead         $70,300

Selling and admin.                        3,700

Payroll Expense

Work in Process                      $305,000

Manufacturing overhead          105,000

Selling and admin.                     185,000

Maintenance expense

Manufacturing overhead         $69,000

Advertising expense

Selling and admin.                   $151,000

Depreciation expense

Manufacturing overhead        $69,600

Selling and admin.                      17,400

Rent expense

Manufacturing overhead       $95,200

Selling and admin.                     16,800

c. Schedule of Cost of Goods Manufactured:

Beginning WIP        $36,000

Raw materials         260,000

Payroll expense      305,000

Manufacturing

overhead applied    418,000

Ending WIP              (99,000)

Finished goods    $920,000

d. Income Statement for the year ended December 31

Sales Revenue                $1,950,000

Cost of goods sold              950,000

Gross profit                     $1,000,000

Selling and Administrative expenses:

Utilities expense    $3,700

Payroll expense   185,000

Advertising exp.   151,000

Depreciation exp.  17,400

Rent expense        16,800 $373,900

Net income                        $626,100

Explanation:

a) Data and Calculations:

Estimated manufacturing overhead = $380,000

Estimated direct labor-hours = 1,000

Actual direct labor-hours = 1,100

Predetermined overhead rate = $380 ($380,000/1,000)

Analysis of Transactions:

a. Raw materials $275,000 Accounts payable $275,000

b. WIP $260,000 Raw materials $260,000

c. Manufacturing overhead (Utility) $70,300 Selling and admin. $3,700 Utilities expense $74,000

d. WIP (direct labor) $305,000 Manufacturing overhead (indirect labor) $105,000 Selling and Admin. $185,000 Payroll Expense $595,000

e. Manufacturing overhead (maintenance) $69,000 Maintenance expense $69,000

f. Selling and admin. $151,000 Advertising expense $151,000

g. Manufacturing overhead $69,600 Selling and admin. $17,400 Depreciation expense $87,000

h. Manufacturing overhead $95,200 Selling and admin $16,800 Rent $112,000

i. WIP $418,000 Manufacturing overhead applied $418,000 ($380 * 1,100)

j. Finished goods $920,000 WIP $920,000

k. Accounts receivable $1,950,000 Sales revenue $1,950,000

Cost of goods sold $950,000 Finished goods $950,000

Beginning balances:

Raw materials $45,000

Work in process $36,000

Finished Goods $75,000

b. a single paragraph.

a paragraph is a series of sentences that are organized and make sense, and are all related to a single topic . almost every piece of writing you do that is longer than a few sentences should be organized into paragraphs. this is because paragraphs show a reader where the subdivisions of an essay begin and end, and thus the reader see the organization of the essay into subjects in order to be able to understand its main points.

3,500 beverages

explanation: