MGAB01H3 Chapter Notes - Chapter 8: Inventory Turnover, Perpetual Inventory
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Zachary Modems, Inc. acquired a subsidiary named Anywhere, Inc. (AI). AI manufactures a wireless modem that enables users to access the Internet through cell phones. The following trial balance was drawn from the accounts of the subsidiary:
Cash | $ | 184,600 | ||||||
Raw materials inventory | 3,680 | |||||||
Work in process inventory | 5,530 | |||||||
Finished goods inventory | 6,450 | |||||||
Common stock | $ | 119,060 | ||||||
Retained earnings | 81,200 | |||||||
Totals | $ | 200,260 | $ | 200,260 | ||||
The subsidiary completed the following transactions during 2017:
1. Paid $55,380 cash for direct raw materials.
2. Transferred $46,160 of direct raw materials to work in process.
3. Paid production employees $73,860 cash.
4. Applied $48,910 of manufacturing overhead costs to work in process.
5. Completed work on products that cost $150,410.
6. Sold products that cost $131,950 for $167,950 cash. Record the recognition of revenue in a row labeled 6a and the cost of goods sold in a row labeled 6b.
7. Paid $18,450 cash for selling and administrative expenses.
8. Actual overhead costs paid in cash amounted to $50,710.
9. Closed the Manufacturing Overhead account. The amount of over- or underapplied overhead was insignificant (immaterial).
10. Made a $4,580 cash distribution to the owners
REQUIRED
A. Prepare a schedule of cost of goods manufactured and sold.
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1.) When products held in inventory are sold:
A.)Cost of Goods Sold is credited.
B.)Work in Process Inventory is credited.
C.)Finished Goods Inventory is credited.
D.)Finished Goods Inventory is debited.
2.)Since manufacturing costs (direct materials, direct labor,and overhead) are incurred in the process of manufacturing units ofproduct, these costs are credited t
A.) | The Direct Materials Inventory, Direct Labor, and ManufacturingOverhead accounts respectively. |
B.) | Liability accounts. |
C.) | The Work in Process Inventory account. |
D.) | The Cost of Goods Sold account. |
3.)Management accounting systems are designed to assistorganizations in the performance of all of the following functionsexcept:
A.) | The assignment of decision-making authority over companyassets. |
B.) | Planning and decision-making. |
C.) | Monitoring, evaluating, and rewarding performance. |
D.) | The preparation of income tax returns. |
4.)In a schedule of cost of finished goods manufactured, thefigure for total manufacturing costs:
A.) May be less than the cost of direct materials used. | |
B.) May be less than the direct labor costs assigned toproduction. | |
C.) May be less than the manufacturing overhead applied toproduction. | |
D.) May be less than the cost of finished goodsmanufactured. |
5.) When a manufacturing company purchases raw materials orcomponent parts to be used in manufacturing finished goods, thesecosts are initially debited to:
A.) Expense accounts. | |
B.) Raw Materials Inventory. | |
C.) Finished Goods Inventory. | |
D.) Manufacturing Overhead. |
6.) The wages paid to employees working directly on a company'sproducts would be shown as a:
A.) Credit to Direct Labor. | |
B.) Debit to Direct Labor. | |
C.) Credit to Work in Process. | |
D.) Debit to Manufacturing Overhead. |
7.) Amounts credited to the Work in Process inventory accountmay best be described as:
A.) The cost of finished goods manufactured. | |
B.) Total manufacturing costs charged to production. | |
C.) The cost of goods sold. | |
D.) Direct materials purchased, direct labor costs paid, andpayments for items classified as manufacturing overhead. |
Corporation is a private corporation formed for the purpose ofproviding the products and the services needed to irrigate farms,parks, commercial products, and private homes. It has a centrallylocated factory in a U.S. city that manufactures the products itmarkets to retail outlets across the nation. It also maintains adivision that provides installation and warranty servicing in sixmetropolitan areas. The month of November has just ended andWaterways needs to generate a cost of goods manufactured and costof goods sold for its income statement for the month. The followingdata is provided:
Accounts Receivable | $ 290,000 |
Advertising Expense | 52,000 |
Cash | 255,000 |
Depreciation â Factory Equipment | 17,500 |
Depreciation â Office Equipment | 2,900 |
Direct Labor | 44,000 |
Factory Supplies Used | 16,300 |
Factory Utilities | 10,500 |
Finished Goods Inventory â November 30 | 71,800 |
Finished Goods Inventory â October 31 | 73,500 |
Indirect Labor | 45,000 |
Office Supplies Expense | 1,900 |
Other Administrative Expenses | 71,000 |
Prepaid Expenses | 42,500 |
Raw Materials Inventory â November 30 | 53,000 |
Raw Materials Inventory â October 31 | 41,000 |
Raw Materials Purchases | 186,500 |
Rent â Factory Equipment | 45,000 |
Repairs â Factory Equipment | 5,400 |
Salaries | 335,000 |
Sales | 1,425,000 |
Sales Commissions | 42,750 |
Work In Process Inventory â November 30 | 44,000 |
Work In Process Inventory â October 31 | 51,000 |
Property Tax on Factory | 5,500 |
Instructions:
a. From the above information, preparea cost of goods manufactured schedule, an income statement, and thecurrent asset section of the balance sheet for WaterwaysCorporation for the month of November.