FISHER COMPANY SOLUTIONS

1. / Journal entries:
(a) / Raw Materials / 60,000
Accounts Payable / 60,000
(b) / Work in Process / 50,000
Manufacturing Overhead / 2,000
Raw Materials / 52,000
(c) / Work in Process / 60,000
Manufacturing Overhead / 15,000
Salaries and Wages Payable / 75,000
(d) / Manufacturing Overhead / 40,000
Cash / 40,000
(e) / Manufacturing Overhead / 13,000
Property Taxes Payable / 13,000
(f) / Manufacturing Overhead / 7,000
Prepaid Insurance / 7,000
(g) / Manufacturing Overhead / 18,000
Accumulated Depreciation / 18,000
(h) / Work in Process / 90,000
Manufacturing Overhead / 90,000*
Predetermined overhead rate = Budgeted manufacturing overhead = 1,200,000
Budgeted machine hours 200,000
= $6/MH
*Applied manufacturing overhead = 15,000 machine hours ´ $6 per MH.
(i) / Salaries Expense / 30,000
Salaries and Wages Payable / 30,000
(j) / Depreciation Expense / 7,000
Accumulated Depreciation / 7,000
(k) / Advertising Expense / 42,000
Cash ….. / 42,000
(l) / Other Selling and Administrative Expense / 8,000
Cash…. / 8,000
(m) / Finished Goods / 158,000
Work in Process / 158,000
(n) / Accounts Receivable / 225,000
Sales / 225,000
Cost of Goods Sold / 118,500
Finished Goods / 118,500
2. / T-accounts and posting of journal entries:
Accounts Receivable / Accounts Payable
Bal / XXX / XXX / Bal
(n) / 225,000 / 60,000 / (a)
Prepaid Insurance / Raw Materials
Bal. / XXX / 7,000 / (f) / Bal. / 7,000 / 52,000 / (b)
(a) / 60,000
Bal. / 15,000
Salaries and Wages Payable / Sales
Bal. / XXX / 225,000 / (n)
75,000 / (c)
30,000 / (i)
Work in Process / Manufacturing Overhead
Bal. / 30,000 / 158,000 / (m) / (b) / 2,000 / 90,000 / (h)
(b) / 50,000 / (c) / 15,000
(c) / 60,000 / (d) / 40,000
(h) / 90,000 / (e) / 13,000
Bal. / 72,000 / (f) / 7,000
(g) / 18,000
Bal. / 5,000
Property Taxes Payable / Cost of Goods Sold
XXX / Bal. / (n) / 118,500
13,000 / (e)
Finished Goods / Depreciation Expense
Bal. / 10,000 / (j) / 7,000
(m) / 158,000 / 118,500 / (n)
Bal. / 49,500
Accumulated Depreciation / Advertising Expense
XXX / Bal. / (k) / 42,000
18,000 / (g)
7,000 / (j)
Other Selling & Admin Expense / Salaries Expense
(l) / 8,000 / (i) / 30,000
Cash
Bal / XXX / 40,000 / (d)
42,000 / (k)
8,000 / (l)
3. / (a) / Calculation of actual overhead:
Indirect material / $ 2,000
Indirect Labor / 15,000
Depreciation: factory building and equipment / 18,000
Rent: factory equipment / 16,000
Utilities / 21,000
Property taxes / 13,000
Insurance / 7,000
Miscellaneous Factory Costs / 3,000
Total actual overhead / $95,000
(b) / Underapplied overhead / = /
= / $95,000 – $90,000*
= / $5,000 underapplied
*$90,000 = 15,000 direct-labor hours ´ $6 per hour.
(c) / Cost of Goods Sold / 5,000
Manufacturing Overhead / 5,000
4. / FISHER COMPANY
Schedule of Cost of Goods Manufactured
For the Month of APRIL
Direct material:
Raw-material inventory, April 1 / $7,000
Add: Purchases of raw material / 60,000
Raw material available for use / $67,000
Deduct: Raw-material inventory, April 30 / 15,000
Raw material used / $ 52,000
Less: Indirect materials included in
manufacturing overhead ...... / 2,000 / $50,000
Direct labor / 60,000
Manufacturing overhead:
Indirect material / $ 2,000
Indirect Labor / 15,000
Depreciation: factory building and equipment / 18,000
Rent: factory equipment / 16,000
Utilities / 21,000
Property taxes / 13,000
Insurance / 7,000
Miscellaneous Factory Costs / 3,000
Total actual manufacturing overhead ...... / 95,000
Less: Underapplied overhead ...... / (5,000)
Overhead applied to work in process ...... / 90,000
Total manufacturing costs / $200,000
Add: Work-in-process inventory, April 1 / 30,000
Subtotal / $230,000
Deduct: Work-in-process inventory, April 30 / 72,000
Cost of goods manufactured / $ 158,000†

†Cost of Job A, which was completed during April.

5. / FISHER COMPANY
Schedule of Cost of Goods Sold
For the Month of APRIL
Finished-goods inventory, April 1 / $10,000
Add: Cost of goods manufactured / 158,000
Cost of goods available for sale / $168,000
Deduct: Finished-goods inventory, April 30 / 49,500
Cost of goods sold / $118,500
Add: Underapplied overhead* / 5,000
Cost of goods sold (adjusted for overapplied overhead) / $123,500*

*The company closes underapplied or overapplied overhead into cost of goods sold. Hence the balance in underapplied overhead is added to cost of goods sold for the month.

6. / FISHER COMPANY
Income Statement
For the Month of APRIL
Sales revenue / $225,000
Less: Cost of goods sold / 123,500
Gross margin / $101,500
Less: Selling and administrative expenses
Salaries Expense / 30,000
Depreciation Expense / 7,000
Advertising Expense / 42,000
Other Expense / 8,000 / 87,000
Income (loss) / $ 14,500