The following trial balance was taken from the records of Fairport Manufacturing Company at the beginning of 2019:
Cash $ 20,000
Raw materials inventory 1,800
Work in process inventory 2,400
Finished goods inventory 4,200
Property, plant, and equipment 15,000
Accumulated depreciation $ 6,000
Common stock 16,800
Retained earnings 20,600
Total $ 43,400 $ 43,400
Transactions for the Accounting Period:
Fairport purchased $11,400 of direct raw materials and $600 of indirect raw materials on account. The indirect materials are capitalized in the Production Supplies account. Materials requisitions showed that $10,800 of direct raw materials had been used for production during the period. The use of indirect materials is determined at the end of the year by physically counting the supplies on hand.
By the end of the year, $10,500 of the accounts payable had been paid in cash.
During the year, direct labor amounted to 950 hours recorded in the Wages Payable account at $21 per hour.
By the end of the year, $18,000 of wages payable had been paid in cash.
At the beginning of the year, the company expected overhead cost for the period to be $12,600 and 1,000 direct labor hours to be worked. Overhead is allocated based on direct labor hours, which, as indicated in Event 3, amounted to 950 for the year.
Selling and administrative expenses for the year amounted to $1,800 paid in cash.
Utilities and rent for production facilities amounted to $9,300 paid in cash.
Depreciation on the plant and equipment used in production amounted to $3,000.
There was $24,000 of goods completed during the year.
There was $25,500 of finished goods inventory sold for $36,000 cash.
A count of the production supplies revealed a balance of $178 on hand at the end of the year.
Any over- or underapplied overhead is considered to be insignificant.
Required
a) Prepare T-accounts with the beginning balances shown in the preceding list and record all transactions for the year including closing entries in the T-accounts.
b) Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet.

Question

Business

Answered

The following trial balance was taken from the records of Fairport Manufacturing Company at the beginning of 2019:
Cash $ 20,000
Raw materials inventory 1,800
Work in process inventory 2,400
Finished goods inventory 4,200
Property, plant, and equipment 15,000
Accumulated depreciation $ 6,000
Common stock 16,800
Retained earnings 20,600
Total $ 43,400 $ 43,400
Transactions for the Accounting Period:
Fairport purchased $11,400 of direct raw materials and $600 of indirect raw materials on account. The indirect materials are capitalized in the Production Supplies account. Materials requisitions showed that $10,800 of direct raw materials had been used for production during the period. The use of indirect materials is determined at the end of the year by physically counting the supplies on hand.
By the end of the year, $10,500 of the accounts payable had been paid in cash.
During the year, direct labor amounted to 950 hours recorded in the Wages Payable account at $21 per hour.
By the end of the year, $18,000 of wages payable had been paid in cash.
At the beginning of the year, the company expected overhead cost for the period to be $12,600 and 1,000 direct labor hours to be worked. Overhead is allocated based on direct labor hours, which, as indicated in Event 3, amounted to 950 for the year.
Selling and administrative expenses for the year amounted to $1,800 paid in cash.
Utilities and rent for production facilities amounted to $9,300 paid in cash.
Depreciation on the plant and equipment used in production amounted to $3,000.
There was $24,000 of goods completed during the year.
There was $25,500 of finished goods inventory sold for $36,000 cash.
A count of the production supplies revealed a balance of $178 on hand at the end of the year.
Any over- or underapplied overhead is considered to be insignificant.
Required
a) Prepare T-accounts with the beginning balances shown in the preceding list and record all transactions for the year including closing entries in the T-accounts.
b) Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet.

Answer :

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Answer:

Fairport Manufacturing Company

T-accounts

Cash

Account Titles Debit Credit

Beginning balance $ 20,000

Accounts payable $10,500

Wages payable 18,000

Selling and distribution expense 1,800

Utilities and Rent for production 9,300

Sales Revenue 36,000

Ending balance $16,400

Raw materials inventory

Account Titles Debit Credit

Beginning balance $ 1,800

Accounts Payable 11,400

Work-in-Process $10,800

Ending balance $2,400

Work in process inventory

Account Titles Debit Credit

Beginning balance $ 2,400

Raw materials 10,800

Wages Payable 19,950

Overhead Applied 11,970

Finished Goods Inventory $24,000

Ending balance $21,120

Finished goods inventory

Account Titles Debit Credit

Beginning balance $ 4,200

Work-in-Process 24,000

Cost of goods sold $25,500

Ending balance $2,700

Property, plant, and equipment

Account Titles Debit Credit

Beginning balance $ 15,000

Accumulated depreciation

Account Titles Debit Credit

Beginning balance $ 6,000

Depreciation expense 3,000

Ending Balance $9,000

Accounts Payable

Account Titles Debit Credit

Raw materials $12,000

Cash $10,500

Ending balance $1,500

Wages Payable

Account Titles Debit Credit

Work-in-Process $19,950

Cash $18,000

Ending balance $1,950

Common stock

Account Titles Debit Credit

Beginning balance $ 16,800

Retained earnings

Account Titles Debit Credit

Beginning balance $ 20,600

Production Supplies

Account Titles Debit Credit

Accounts Payable $600

Overhead $422

Ending balance $178

Overhead Expenses

Account Titles Debit Credit

Work-in-Process $11,970

Cash (Utilities) 9,300

Depreciation expense 3,000

Production supplies 422

Cost of goods sold (Underapplied) 752

Sales Revenue

Account Titles Debit Credit

Cash $36,000

Income Summary $36,000

Cost of Goods Sold

Account Titles Debit Credit

Finished Goods Inventory $25,500

Overhead (underapplied) 752

Income Summary $26,252

Selling and Distribution Expense

Account Titles Debit Credit

Cash $1,800

Utilities and Rent

Account Titles Debit Credit

Cash $9,300

Overhead $9,300

Depreciation Expense - Plant & Equipment

Account Titles Debit Credit

Accumulated Depreciation $3,000

Overhead $3,000

b) Schedule of Cost of Goods Manufactured and Sold:

WIP Beginning Inventory $ 2,400

Raw materials 10,800

Direct labor 19,950

Overhead Applied 11,970

Cost of goods in production $45,120

Ending WIP Inventory 21,120

Cost of manufactured $24,000

Finished Goods Inventory $ 4,200

Cost of manufactured 24,000

Cost of goods available $28,200

Ending FG Inventory 2,700

Cost of goods sold $25,500

Income Statement for the year ended December 31, 2019:

Sales Revenue $36,000

Cost of Goods Sold 26,252

Gross profit 9,748

Selling and distribution exp. 1,800

Net income $7,948

Retained Earnings, January 1, 2019 $20,600

Net income 7,948

Retained Earnings, December 31, $28,548

Balance Sheet as of December 31, 2019:

Assets:

Cash $ 16,400

Raw materials inventory 2,400

Work in process inventory 21,120

Finished goods inventory 2,700

Production Supplies 178 $42,798

Property, plant, and equipment 15,000

Accumulated depreciation 9,000 $6,000

Total assets $48,798

Liabilities and Equity:

Accounts Payable $1,500

Wages Payable 1,950

Total liabilities $3,450

Common stock $16,800

Retained earnings 28,548 $45,348

Total liabilities and equity $48,798

Explanation:

a) Data and Calculations:

Trial Balance at January 1, 2019:

Account Titles Debit Credit

Cash $ 20,000

Raw materials inventory 1,800

Work in process inventory 2,400

Finished goods inventory 4,200

Property, plant, and equipment 15,000

Accumulated depreciation $ 6,000

Common stock 16,800

Retained earnings 20,600

Total $ 43,400 $ 43,400

Analysis of Transactions for the period:

1. Raw materials $11,400 Production Supplies $600 Accounts payable $12,000

2. Work-in-Process $10,800 Raw materials $10,800

3. Accounts payable $10,500 Cash $10,500

4. Work-in-Process $19,950 Wages Payable $19,950

5. Wages Payable $18,000 Cash $18,000

6. Work-in-Process $11,970 Overhead Applied $11,970 ($12,600 * 950/1,000)

7. Selling and Administrative expense $1,800 Cash $1,800

8. Utilities and Rent for production $9,300 Cash $9,300

9. Depreciation Expense-Plant and Equipment $3,000 Accumulated Depreciation $3,000

10. Finished Goods Inventory $24,000 Work-in-Process $24,000

11. Cost of Goods Sold $25,500 Finished Goods Inventory $25,500

12. Cash $36,000 Sales Revenue $36,000

13. Overhead $422 Production Supplies $422 ($600 - $178)

14. Cost of Goods Sold $752 Underapplied Overhead $752

Adjusted Trial Balance at December 31, 2019:

Account Titles Debit Credit

Cash $ 16,400

Raw materials inventory 2,400

Work in process inventory 21,120

Finished goods inventory 2,700

Property, plant, and equipment 15,000

Accumulated depreciation $ 9,000

Accounts Payable 1,500

Wages Payable 1,950

Common stock 16,800

Retained earnings 20,600

Production Supplies 178

Sales Revenue 36,000

Cost of Goods Sold 26,252

Selling and distribution exp. 1,800

Totals $85,850 $85,850