Problem 1. Journal Entries
Record the following journal entries for TEB Company in good form and without abbreviations.
Do not provide explanations beneath your journal entries.
a. Raw materials used in production total $35,000: $30,000 direct and $5,000 indirect
b. Salaries and wages costs incurred/accrued, but not yet paid, $115,000:
Direct manufacturing labor cost, $60,000
Indirect manufacturing labor cost, $40,000
Sales salaries, $15,000
c. Depreciation on factory equipment, $38,000
d. Manufacturing overhead is applied at a predetermined rate of 200% of direct labor cost
e. Cost of goods manufactured for the month, $160,000
f. Goods costing $150,000 to produce were sold on credit for $225,000. Only record the goods leaving the company. Assume someone else will record the credit sale.
Problem 2. Cost of Goods Sold section of income statement
Prepare for Buttross Company, in good form and without abbreviations, the Cost of Goods Sold section of the income statement (Only the cost of goods sold section. )
In order to present cost of goods sold, you will need to compute the cost of goods manufactured. Do NOT present a Statement of Cost of Goods Manufactured in your solution and do NOT show the computation of cost of goods manufactured .
The following costs relate to one month’s operations:
Rent on factory building350
Maintenance of factory equipment100
Direct material used1,200
Utilities in factory200
Work in process, beginning800
Work in process, end600
Finished goods, beginning500
Finished goods, end250
Problem 3. Activity-Based Costing
Prepare for World Company, in good form and without abbreviations, a computation of the estimated product cost per unit for the current period using the activity-based costing approach.
World Company manufactures two products, Product X and Product Z. The company estimates it will incur $100,000 of manufacturing overhead for the current period. Overhead currently is assigned to the products using direct labor hours. Data concerning the current period’s operations under the traditional system are:
Product XProduct Z
Estimated volume in units4001,500
Direct labor hours per unit0.701.20
Direct materials cost per unit$10.50$16.75
Direct labor cost per unit$11.25$20.00
Manufacturing overhead cost per unit*$33.66$57.70
* Using direct labor hours as the allocation base: 400 units x 0.7 direct labor hours per unit + 1,500 units x 1.2 direct labor hours per unit = 2,080 estimated direct labor hours; $100,000 estimated manufacturing overhead/2,080 direct labor hours (DLH) = $48.08 per DLH; $48.08 x 0.70 = $33.66 and $48.08 x 1.20 = $57.70.
In order to compute estimated cost under activity-based costing, the company has identified two activity cost pools, broken down the estimated overhead, and estimated activity levels as follows:
Activity Cost PoolOverheadProduct XProduct ZTotal
Setup machines$ 20,000200300500
Prepare purchase orders80,0009005001,400
Problem 4. Cash Budget
Prepare for StartUp Company, in good form and without abbreviations, a cash budget for the month of January, 2015.
StartUp Company has asked you to prepare a cash budget for the month of January 2015, using the following information:
Projected cash balance at December 31, 2014, $2,000
Minimum cash balance desired January 31, 2015, $4,000.
Minimum cash balance desired, December 31, 2015, $8,000
Projected transactions in January are:
Cash collections from sales$25,000
Cash from tax refund14,000
Purchases of merchandise inventory10,000
Selling and administrative expenses (excluding depreciation)25,000
Depreciation of building and equipment15,000
Purchases of store equipment(one-half to be paid in February)40,000
Declaration of a dividend (100% to be paid in February)12,000
Amortization of patents11,000
Where a projected transaction involves a cash outlay, unless otherwise noted the cash will be paid in January.
The company has a line of credit at the bank, which allows borrowing up to $100,000. Since March 2014, the company has had loans of $30,000 outstanding at 12% interest. Interest is payable quarterly on March 31, June 30, September 30, and December 31.