Hogle Company is a manufacturing firm that uses job-order costing. On January 1, the beginning of its fiscal year, the company’s inventory balances were as follows:
Raw materials $20,000
Work in process 15,000
Finished goods 30,000
Prepaid Insurance 10,000
The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year, the company estimated that it would work 75,000 machine hours and incur $450,000 in manufacturing overhead cost.
The following transactions were recorded for the year:
1. Raw materials were purchased on account, $410,000.
2. Raw materials were requisitioned for use in production, $380,000 ($360,000 direct materials and $20,000 indirect materials).
3. The following costs were incurred for employee services: direct labour, $75,000; indirect labour, $110,000; sales commissions, $90,000; and administrative salaries, $200,000.
4. Sales travel costs were incurred, $17,000.
5. Utility costs were incurred in the factory, $43,000.
6. Advertising costs were incurred, $180,000.
7. Depreciation was recorded for the year, $350,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
8. Insurance expired during the year, $10,000 (70% relates to factory operations, and the remaining 30% relates to selling and administrative activities).
9. Manufacturing overhead was applied to production. Due to greater than expected demand of its products, the company worked 80,000 machine hours during the year.
10. Goods costing $900,000 to manufacture according to their job cost sheets were completed during the year.
11. Goods were sold on account to customers during the year at a total selling price of $1,500,000. The goods cost $870,000 to manufacture according to their job cost sheets.
1. Prepare journal entries to record the preceding transactions.
2. Post the entries in (1) above to T-accounts (do