Bergo Bay’s accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded.
These six documents must be processed to bring the accounting records up to date.
Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 200% of direct labor cost.
Required
1. Use the document information above to prepare journal entries for the following costs.
a. Direct materials. d. Indirect materials.
b. Direct labor. e. Indirect labor.
c. Overhead applied.
2. Set up a Factory Overhead T-account and enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.
3. Prepare a revised list of account balances as of December 31.
4. Prepare an income statement for the year and a balance sheet as of December 31.
5. Assume that the $5,600 on materials requisition 12 should have been direct materials charged to Job 404. Does this error result in overstatement or understatement of total assets on the balance sheet at December 31?
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