Bergamo Bay\'s computer system generated the following trial balance on December
ID: 2582367 • Letter: B
Question
Bergamo Bay's computer system generated the following trial balance on December 31, 2015. The com- pany's manager knows something is wrong with the trial balance because it does not show any balance Problem 19-2A Source documents, journal entries, overhead, for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition. and financial reports the accrued factory payroll (Factory Payroll Payable) has not been recorded. P1 P2 P3 P Debit Credit $170,000 75,000 80,000 Accounts receivable work in process inventory . . Finished goods inventory . . 15,000 $17,000 Accounts payable Notes payable Common stock Retained earnings 50,000 271,000 373,000 Factory overhead Operating expenses … … Totals 115,000 60,000 $736,000 $736,000 After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date. Materials requisition 21-3010: $10.200 direct materials to Job 402 Materials requisition 21-3011: $18,600 direct materials to job 404 Materials requisition 21-3012 $5,600 indirect materialts Labor time ticker 6052 Labor time ticket 6053 Labor time ticket 6054 36.000 direct labor to job 402 $23,800 direct labor to Job 404 $8,200 indirect laborExplanation / Answer
Answer:
1. Use information on the six source documents to prepare journal entries to assign the following costs.
Date
Decription
Debit $
Credit $
a. Direct materials costs to Work in Process Inventory.
WIP (10200+18600)
$ 28,800
Raw Materials
$ 28,800
(to Record direct materials used)
b. Direct labor costs to Work in Process Inventory.
WIP (36000+23800)
$ 59,800
Wages Payable
$ 59,800
(to Record direct labor used)
c. Overhead costs to Work in Process Inventory.
WIP (200%*59800)
$ 119,600
To overhead
$ 119,600
(to record OH applied, 200% of DL)
d. Indirect materials costs to the Factory Overhead account.
Overhead
$ 5,600
To raw material
$ 5,600
(t0 Indirect materials used added to OH)
e. Indirect labor costs to the Factory Overhead account.
Overhead
8200
To wages payable
8200
____________________________________________________
2
Determine the revised balance.
Factory OH
DR
CR
Bal
$ 115,000
$ 119,600
add'l ind. Matl.
$ 5,600
add'l ind. Lbr
$ 8,200
$ 9,200
Under
applied OH
Date
Decription
Debit $
Credit $
a. Direct materials costs to Work in Process Inventory.
COGS
9200
TO Overhead
9200
(to Adjust for underapplied OH)
Adjustments
WIP
Raw Materials
Job 402
Job 404
Total
$ 80,000
Orig bal
DM
$ 10,200
$ 18,600
$ 28,800
$ (28,800)
add'l used
DL
$ 36,000
$ 23,800
$ 59,800
$ (5,600)
add'l ind mtl
OH
$ 72,000
$ 47,600
$ 119,600
$ 45,600
Tot
$ 118,200
$ 90,000
$ 208,200
Wages Payable
$ 59,800
COGS
$ 218,000
$ 8,200
$ 9,200
$ 68,000
$ 227,200
__________________________________________________________
3
BERGAMO BAY COMPANY
Trial Balance
December 31, 2015
BERGAMO BAY COMPANY
Trial Balance
December 31, 2015
DR
CR
Cash
$ 170,000
Accounts receivable
$ 75,000
Raw materials inventory
$ 45,600
Work in process inventory
$ 208,200
Finished goods inventory
$ 15,000
Prepaid rent
$ 3,000
Accounts payable
$ 17,000
Wages payable
$ 68,000
Notes payable
$ 25,000
Common stock
$ 50,000
Retained earnings
$ 271,000
Sales
$ 373,000
Cost of goods sold
$ 227,200
Factory overhead
$ -
Operating expenses
$ 60,000
Totals
$ 804,000
$ 804,000
______________________________________________
4
BERGAMO BAY COMPANY
Income Statemnt
December 31, 2015
Sales
$ 373,000
Cost of goods sold
$ (227,200)
Gross profit
$ 145,800
Operating expenses
$ (60,000)
Net income
$ 85,800
BERGAMO BAY COMPANY
Balance Sheet
December 31, 2015
Assets
Cash
$ 170,000
Accounts receivable
$ 75,000
Inventories
Raw materials inventory
$ 45,600
Work in process inventory
$ 208,200
Finished goods inventory
$ 15,000
$ 268,800
Prepaid rent
$ 3,000
Total assets
$ 516,800
Liabilities and equity
Accounts payable
$ 17,000
Wages payable
$ 68,000
Notes payable
$ 25,000
Total liabilities
$ 110,000
Common stock
$ 50,000
Retained earnings
$ 356,800
Total stockholders' equity
$ 406,800
Total liabilities and equity
$ 516,800
________________________________________________
5
Costs would be understated, net income would be overstated Assets would be understated (WIP, raw materials)
Date
Decription
Debit $
Credit $
a. Direct materials costs to Work in Process Inventory.
WIP (10200+18600)
$ 28,800
Raw Materials
$ 28,800
(to Record direct materials used)
b. Direct labor costs to Work in Process Inventory.
WIP (36000+23800)
$ 59,800
Wages Payable
$ 59,800
(to Record direct labor used)
c. Overhead costs to Work in Process Inventory.
WIP (200%*59800)
$ 119,600
To overhead
$ 119,600
(to record OH applied, 200% of DL)
d. Indirect materials costs to the Factory Overhead account.
Overhead
$ 5,600
To raw material
$ 5,600
(t0 Indirect materials used added to OH)
e. Indirect labor costs to the Factory Overhead account.
Overhead
8200
To wages payable
8200