Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for…

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 $349,800 of manufacturing overhead for an
estimated allocation base of 1,060 direct labor-hours. The
following transactions took place during the year:

Raw materials purchased on account, $230,000.
Raw materials used in production (all direct materials),
$215,000.
Utility bills incurred on account, $65,000 (85% related to
factory operations, and the remainder related to selling and
administrative activities).
Accrued salary and wage costs:

Direct labor (1,135 hours)
$
260,000

Indirect labor
$
96,000

Selling and administrative salaries
$

140,000

Maintenance costs incurred on account in the factory,
$60,000
Advertising costs incurred on account, $142,000.
Depreciation was recorded for the year, $90,000 (75%
related to factory equipment, and the remainder related to selling
and administrative equipment).
Rental cost incurred on account, $115,000 (80%
related to factory facilities, and the remainder related to selling
and administrative facilities).
Manufacturing overhead cost was applied to jobs,
$ ? .
Cost of goods manufactured for the year,
$830,000.
Sales for the year (all on account) totaled
$1,500,000. These goods cost $860,000 according to their job cost
sheets.

The balances in the inventory accounts at the beginning of the
year were:

Raw Materials
$
36,000

Work in Process
$
27,000

Finished Goods
$
66,000

Required:
1. Prepare journal entries to record the preceding
transactions.
2. Post your entries to T-accounts. (Don’t forget to enter the
beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the
Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.

Froya Fabrikker A/S Schedule of Cost of Goods Manufactured Direct materials: Total raw materials available Materials used in production Total manufacturing costs Cost of goods manufactured