Reference no: EM13618465

Company is a manufacturer that uses job-order costing. On January 1, the beginning of its fiscal year, the company's inventory balances were as follows: 

Raw   Materials----------------------------------------------------------------------------------$20,000 Work in   Process--------------------------------------------------------------------------------$15,000 Finished   Goods---------------------------------------------------------------------------------$30,000

The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year, the company estimated that it would work 75,000 machine-hours and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a. Raw materials were purchased on account, $ 410,000

b. Raw materials were requisitioned for use in production, $ 380,000 ($360,000 direct materials and $20,000 indirect materials).

c. The following costs were incurred for employees services: direct labor, $ 75,000; indirect labor,$110,000; sales commissions, $90,000; and administrative salaries,$200,000

d. Sales travel costs were $ 17,000

e. Utility costs in the factory were $ 43,000

f.  Advertising costs were $ 180,000

g. Depreciation was recorded for the year, $ 350,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

h. Insurance expired during the year, $ 10,000(70% relates to factory operations, and the remaining 30% relates to selling and administrative activities).

i.  Manufacturing overhead was applied to production. Due to greater than expected demand for its products, the company worked 80,000 machine-hours during the year.

j.  Good costing $900,000 to manufacture according to their job cost sheets were completed during the year.

k. Goods were sold on account to customers during the year for a total of $ 1,500,000. The goods cost $ 870,000 to manufacture according to their job cost sheets.

Required:

1. Prepare journal entries to record the preceding transactions.

2. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.