Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales
The company uses a job order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined
overhead rate is based on a cost formula that estimated $85 500 of manufacturing overhead for an estimated activity level of $45,000
direct labor dollars. At the beginning of the year, the inventory balances were as follows:
10
points
Book
waterials
work in process
Finished goods
$10,400
54.100
$ 8,500
During the year, the following transactions were completed:
a Raw materials purchased on account, S164.000
b. Raw materials used in production, $145,000 (materials costing $120,000 were charged directly to jobs the remaining materials
were indirect
c Costs for employee services were incurred as follows:
Direct labor
Indirect labor
Sales comissions
Administrative salaries
$ 169,00
$336,00
$ 27,00
$49.000
d. Rent for the year was $18.600 ($13.700 of this amount related to factory operations, and the remainder related to selling and
administrative activities)
e Utility costs incurred in the factory, $16.000
Advertising costs incurred, 510.000
Depreciation recorded on equipment. $23,000. (516.000 of this amount related to equipment used in factory operations, the
remaining $7000 related to equipment used in selling and administrative activities)
h Manufacturing overhead cost was applied to jobs ?
Goods that had cost $226,000 to manufacture according to their job cost sheets were completed
Sales for the year (al paid in cash totaled $504.000 The total cost to manufacture these goods according to their job cost sheets
was $216.000
Required:
1. Prepare journal entries to record the transactions for the year

2. Prepare T-accounts each inventory account, Manufacturing Overhead, and Cost of Goods Sold Post relevant data from your Journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts)

3a. Is Manufacturing Overhead underapplied or overapplied for the year ?

3b. 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 yearAll of the information needed the statement is available in the entries and T - accounts you have prepared.