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 that 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:Raw materials purchased on account, $220,000.Raw materials used in production (all direct materials), $205,000.Utility bills incurred on account, $63,000 (90% related to factory operations, and the remainder related to selling and administrative activities).Accrued salary and wage costs:

Required:

Prepare journal entries to record the preceding transactions.

a) raw materials 220,000 debit

        accounts payable    220,00 credit

b) WIP    205,000 debit

     raw materials  205,000 credit

c) factory overhead   56,700 debit

  utilities expense       6,300 debit

         utilities payable    63,000  credit

d) WIP                      320,000 debit

  Factory overhead 108,000 debit

  salaries expense  200,000 debit

            salaries and wages payables   628,000 credit

e) factory overhead   72,000 debit

                  cash             72,000 credit

f) advertizing expense 154,000 debit

                       cash                154,000 credit

g) factory overhead                 67,500 debit

   depreciation expense        22,500 debit

       acc depreciation- equipment       90,000 credit

h) factory overhead     92,000 debit

  rent expense             23,000 debit

          cash                              115,000 credit

i)   WIP (970 hours x $380 each)  368,600 debit

                     factory overhead        368,600 credit

j) finished goods 950,000 debit

         WIP                         950,000 credit

k) account receivables   2,100,000 debit

          sales revenues              2,100,000 credit

   cost of goods sold       980,000 debit

           finished goods             980,000 credit

Missing information:

d. Accrued salary and wage costs:

Direct labor (970 hours) $320,000

Indirect labor $108,000

Selling and administrative salaries $200,000

e. Maintenance costs incurred on account in the factory, $72,000.

f. Advertising costs incurred on account, $154,000.

g. Depreciation was recorded for the year, $90,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment)

h. Rental cost incurred on account, $115,000 (80% related to factory facilities, 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, $950,000.

k. Sales for the year (ail on account) totaled $2.100.000. These goods cost $980.000 according to their job cost sheets.

Explanation:

Applied overhead calculations:

expected overhead 380,000

estimated cost driver (DLH) 1,000

rate: $380,000 / 1,000 = $380/DLH

there was 970 direct labor hours recorded therefore we apply the rate to that amount to get the amount.

For each entry we remember that debit = credit

explanation of the entries

The factory related expenses for rent and utiltiies will be capitalize through factory overhead

The raw materials used, an direct labor wil lbe part of workin  process

the indirect labor part of factory overhead and the other department will be considered expenses for the period.

the advertizement cost are considered expenses as well.

the cost of good manufactured represent the finished jobs which are no longer "in process" and become finished.

Once they are sols we decrease the finished goods and recognize the cost of goods sold.

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

answer; niosh, the national institute for occupational safety and health;