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Bath Designs Inc_Journal to Final Accounts




Question;Introduction;The;transactions in this practice set were completed by Bath Designs Inc. during;January, the first month of the company?s fiscal year. The company designs and;manufactures a limited variety of custom bathroom storage cabinets and sauna;units, and it maintains a job-order cost system.;You;have accepted a position with Bath Designs Inc. as assistant controller, and;you will begin your duties on January 1 of the current year. In your review of;the previous assistant controller?s records, you notice some jobs were;incomplete as of December 31 of the previous year. These jobs are contained in;the Job Cost Records. You plan to complete most of these jobs in January and to;accept new jobs from builders and contractors. You are responsible for the;daily accounting operations, preparation of interim financial statements, and;end-of-month adjusting and closings entries.;Bath;Designs Inc. manufactures all products in a single production department. An;individual job-order cost sheet is maintained for each job. The job-order cost;sheet contains accumulated costs for each job, including actual direct;materials, actual direct labor, and applied factory overhead.;Gross;pay for direct labor is recorded by a debit to Work in Process. Salaries for;all other factory personnel are recorded by a debit to Factory Overhead.;Salaries of non-factory personnel are recorded at the end of each month by a;debit to the appropriate salary expense accounts. Deductions for FICA tax at;7.65% of gross pay (this includes the Medicare Tax deduction) and employees?;income tax at 18% of gross pay are recorded whenever gross pay is recorded. All;wages are paid on the last day of the month. All employer payroll taxes are;recorded at the end of the month. Payroll taxes related to factory personnel;are debited to Factory Overhead. Payroll taxes related to all other company;personnel are debited to Payroll Taxes Expense?General.;Bath;Designs Inc. maintains two materials accounts, one for Direct Materials and one;for Indirect Materials and Factory Supplies.;Factory;overhead is applied to each job based on 125% of direct labor cost for that;job. Bath Designs Inc. maintains only one factory overhead account. Remember;that debits to Factory Overhead represent actual overhead and credits to;Factory Overhead represent applied overhead. Since the difference between;actual factory overhead and applied factory overhead is insignificant, the;over-applied or under-applied balance is closed out to Cost of Goods Sold as an;adjusting entry at the end of each month.;Bath;Designs Inc. marks up all work by 35% of the job cost. Refer to the individual;Job Cost Record for the total cost of the job and multiply the total cost by;135% to determine the selling price for each job.;Since;Bath Designs Inc. sells to builders and contractors, sales are exempt from;state sales tax. All sales are on account and are subject to terms of 1/10, net;30 days, FOB shipping point.;Accounts;Payable is used solely for the purchase of direct materials and indirect;materials and factory supplies. All vendors except full payment within 30 days.;Operating expenses, with the exception of any accrued salaries, payroll taxes;property taxes, and income taxes, are paid when incurred.;All;cash received is deposited in the bank, and all payments are made by check.;When;dealing with an accounts receivable or accounts payable item, be sure to record;the company name in the General Ledger and post to Accounts Receivable or;Accounts Payable Ledger.;It is;January 1, and you are ready to assume your new responsibilities.;General;Instructions;1.;Journalize the entries for the month of January in the General Journal. When;using the Work in Process account, be sure to post to the appropriate Job Cost;Record.;1.;Post the General Journal entries to the General Ledger, the Accounts Payable;Ledger, and the Accounts Receivable Ledger.;2.;Prepare Schedules of Accounts Receivable and Accounts Payable.;3.;Prepare the Trial Balance section of the work sheet.;4.;Complete the work sheet using the adjusting entries data for the Adjustment;columns.;5.;Prepare the following statements;A.;Income Statement;B.;Retained Earnings Statement;C.;Balance Sheet;6.;Journalize and post the adjusting entries;7.;Journalize and post the closing entries. (It is acknowledged that this step is;not performed until year end, this is for instructional purposes only.);8.;Prepare a Post-Closing Trial Balance.;NARRATIVE;OF TRANSACTIONS;Note;Certain transactions, such as those dealing with payroll, require detailed;computational work before preparing the journal entry. These transactions are;explained initially in the narrative as they occur. Please refer to the original;transaction when preparing a subsequent similar transaction.;Jan. 2;Paid Berkeley Road Properties $3,600 for January rent. Of this amount, 30% is;for office;Facilities;and 70% is for factory facilities.;Jan. 2;Paid Pierce Advertising Agency $490 for preparing advertisements in local;newspapers.;Jan. 3;Paid Liberty Wood Products Company $8413.12 in payment of December 31 balance.;Jan. 3;Received a check from Kian Corporation for the amount due within the discount;period.;Jan. 4;Paid State National Bank $25,681.41 for December payroll taxes payable as;follows;Employee?s;Income Tax Payable, $15,812.27, FICA Tax Payable, $9143.73, Federal;Unemployment;Tax, $319.19, State Unemployment Tax, $406.22.;Jan. 4;Paid $7,423.36 for Income Tax Payable.;Jan. 4;Paid Ohio Plastics Company $10,714.00 in payment of the December 31 balance.;Jan. 4;Applied $3,624.00 of direct materials (requisition No. 670) and $8,120 of;direct labor (time ticket No. 129) to Job No. 403, which will complete the job.;The FICA rate is 7.65% of gross pay and the employees? income tax rate is 18%;of gross pay. When preparing the entry for applying direct labor, debit Work in;Process for the gross pay, and credit Employees? Income Tax Payable and FICA;Tax Payable for the appropriate amounts and Salaries Payable for net pay.;Remember;that employees are paid on the last day of each month.;Applied;factory overhead to Job No. 403 is based upon 125% of direct labor cost.;Transferred;the completed job to the finished goods account.;Jan. 5;Sold and shipped Job No. 403 to the appropriate customer. All sales are on;account 1/10, net 30 days, FOB shipping point. Bath Designs Inc. marks up all;work by 40% of the job cost (NOTE IN THE ORIGINAL INSTRUCTION SHEET IT SAYS BY;35%, SO NOT SURE WHICH TO USE). Refer to the individual Job Order Cost Sheet;for the total cost of the job and multiply the total cost by 140% to determine;the selling price for each job.;Bath;Designs, Inc. maintains a perpetual inventory system. Each time a sale is made;to a customer, you must debit Cost of Goods Sold and credit Finished Goods for;the cost of the job.;Jan. 8;Requisitioned $1,241.27 of indirect materials and factory supplies to be used;in the manufacture of all jobs currently in process. (Materials requisition No.;680);Jan. 9;Paid Bob Davis, County Tax Collector, $6321.00 for property taxes accrued as of;December 31.;Jan. 9;Purchased from Glory Container Corporation $2,243.26 of indirect factory;supplies, credit terms net 15 days.;Jan. 9;Accepted a job for the manufacture of 17 closet units for Bloomingdale;Engineering. The promise date is Feb. 14. Began the job today by applying;$5,914.00 of direct materials to Job. No. 406. (Materials requisition No. 681.);Jan.;10 Received a check from Tarara Design Corporation for the amount due within;the discount period.;Jan.;11 Paid Rorick Hardware Inc. $9,100.00 in payment of the December 31 balance.;Jan.;11 Applied $1,327.14 of direct materials to Job. No. 402 (No. 682);Jan.;12 Received a check from Ryan Sales Company for the amount due after the;discount period has expired.;Jan.;15 Applied $2,214.06 of direct materials to Job No. 404 (No. 683);Jan.;16 Purchased $503.00 of factory supplies from Samantha Supplies, Inc. and paid;cash.;Jan.;16 Applied $3,216.50 of direct labor to Job. No. 405, which will complete the;job. (Time ticket No. 130);Applied;factory overhead using the appropriate rate.;Transferred;the completed job to the finished goods account.;Jan.;16 Sold four standard vanity units to a cash customer for $1,400. The cost of;the goods shipped from finished goods inventory was $1,000.00.;Jan.;17 Requisitioned $614.50 of indirect materials and factory supplies to be used;in all factory jobs currently in process (Materials requisition No. 684);Jan.;17 Signed a contract with Elliana Interiors for the manufacture of 120 counter;units. The promise date is Feb. 15. Began the job today by applying $4,220.00;of direct materials to Job. No. 407 (Materials requisition No.685);Jan.;17 Paid the sales manager of Bath Designs Inc. $142.62 for customer;entertaining.;Jan.;18 Received a report from the treasurer that Pickens Contractors, one of our;customers, has declared bankruptcy. Wrote off the balance owed to Bath Designs;Inc. by Pickens Contractors.;Jan.;18 Sold and shipped Job. No. 405 to the appropriate customer. Refer to that;job?s Cost Record for the total cost of the job to determine the selling price.;Jan.;22 Purchased $10,232.16 of direct materials from Neola Supply Company, credit;terms net 30 days.;Jan.;22 Accepted a job for the manufacture of 12 sauna units for Maplewood;Designers. The promise date is Jan. 31. Began the job today by applying;$2,468.10 of direct materials to Job No. 408 (Materials requisition No. 686);Jan.;24 Paid Glory Container Corp. the amount due today from the Jan. 9 purchase.;Jan.;25 Applied $1,660 of direct labor to Job. No. 402, which will complete the job.;(Time ticket No.131);Applied;factory overhead using the appropriate rate.;Transferred;the completed job to the finished goods account.;Jan.;26 Sold and shipped Job No. 402 to the appropriate customer. Refer to that;job?s Cost Record for the total cost of the job to determine the selling price.;Jan.;26 Ap0plied $3,640 of direct labor to Job. No. 408, which will complete the;job. (time ticket No 132);Applied;factory overhead using the appropriate rate.;Transferred;the completed job to the finished goods account.;Jan.;29 Sold and shipped Job No 408 to the appropriate customer. Refer to that job?s;Cost Records for the total cost of the job for billing purposes.;Jan.;29 Paid Foley Tool Company amount due in payment of the Jan. 1 balance.;Jan.;29 Received a check from Powell Contractors Inc. for the amount due after the;discount period has expired.;Jan.;29 Paid Post Office $500.00 for postage added to postage meter. Expense this;amount.;Jan.;29 Paid Telephone Company $250.00 for Jan. phone service.;Jan.;29 Paid Owen Advertising Company $1,000.00 for designing ads for our new;Internet website.;Jan.;29 Paid Allied Power and Light company $4,216.00 for heat, power, and light.;Allocate 25% of this amount to Electricity Expense and 75% to Factory Overhead.;Jan.;31 Applied $1,000.00 of direct labor to Job 404 (time ticket No. 133);Applied;factory overhead using the appropriate rate. This job will not be completed;until Feb.;Jan.;31 Applied $4,220.00 of direct labor to Job 407 (time ticket No. 134);Applied;factory overhead using the appropriate rate. This job will not be completed;until March.;Jan.;31 Applied $1,160.00 of direct labor to Job 406 (time ticket No. 135);Applied;factory overhead using the appropriate rate. This job will not be completed;until Feb.;Jan.;31 Received the following data on the monthly payroll from the payroll clerk;Direct;Labor (already recorded): $23,016.50;New;payroll data (to be recorded);Indirect;$11,220.00;Superintendent?s;Salary 3,100.00;Sales;salaries 11,975.00;Officers?;salaries 7,140.00;Office;salaries 6310.10;Record;the monthly payroll in the general journal. Remember that direct labor payroll;already has been recorded as it was incurred in Jan. Salaries for indirect;labor are recorded only at the end of the month. Debit Factory Overhead for;Indirect Labor and Superintendent?s salaries, debit other salary expense;account for the appropriate amounts, credit FICA Tax Payable for 7.65% of gross;pay, credit Employees? Income Tax Payable for 18% of gross pay, and credit;Salaries Payable for the net pay.;All;payroll taxes relating to factory personnel are debited to Factory Overhead;all payroll taxes related to non-factory personnel are debited Payroll Taxes;Expense ? General. The FICA tax is 7.65% of gross pay, state unemployment. Tax;is 5.4% of gross pay and federal unemployment. Tax is 0.8% of gross pay. Since;this is the first month in the current year, no employee has reached the;ceilings on the payroll taxes. Round the charge to Factory Overhead down to the;next cent.;Jan.;31 Received a check from Seng Contractors for the amount due after the discount;period has expired.;Jan.;31 Received a check from Ruth Builders for the amount due after the discount;period has expired.;Jan.;31 Paid all employees for wages earned in Jan.;Jan.;31 Purchased $8,214.00 of direct materials on account from Rorick Hardware Inc.;(Take;a trial balance at this point.) According to the book, the total for the debit;and credit columns on the general journal BEFORE adjusting and closing entries;are made should be $921,436.06. The total for adjusting entries is $18,635.08.;Note: The figure for Factory Overhead and Cost of Goods Sold is rounded.;Adjusting;Entries;Jan.;31 Insurance expired during January;Factory;1,314.00;Selling;61.25;General;268.80;Jan.;31 Office supplies inventory as of Jan. 31 is $1,650;Jan.;31 Depreciation for the month;Factory;equip 642.00;Office;equip. 369.70;Jan.;31 Amortization of patents for Jan (debit Factory Overhead) 225.00;Jan.;31 Property tax accrued for the month;Factory;485.00;General;137.26;Jan.;31 Close out under applied Factory Overhead of $1,427.24 to Cost of Goods Sold.;Jan.;31 Based on past experience, Bath Designs estimates that $7,900.00 is a;reasonable balance for the Jan. 31 balance in the Allowance for Doubtful;Accounts.;Jan.;31 Income tax is based on 40% of income before tax. Accrue income tax owed by;debiting Income Tax Expense and crediting Income Tax Payable for $6,748.83.;(Prepare;all reports at this point and print general ledger NOW);Closing;Entries;Jan.;31 Prepare closing entries to close revenue and expense accounts to Income;Summary, and transfer net income to Retained Earnings. (It is acknowledged that;this step is not performed until year end, this is for instructional purposes;only.) Prepare a Post-Closing Trial Balance.;Bath Designs Inc.;Trial Balance;January 1, 20?;Account Account;Title Debit Credit;Number;$81, 412.27;110 Cash;111 Accounts;Receivable;87,611.02;112 Allowance for Doubtful Accounts;$3,367.00;121 Direct Materials 71,200.00;122 Indirect;Materials and Factory Supplies 19,216.27;123 work in;Process;130,584.50;124 Finished;Goods;21,325.77;131 Prepaid;Insurance;7,140.00;132 Office;Supplies;1,900.00;161 Factory Equipment;251,944.33;162 Accumulated;Depreciation-Factory Equipment;101,212.34;163 Office;Equipment 62,943.22;164 Accumulated;Depreciation- Office Equipment;21,336.20;171 Organization;Costs;7,320.00;172 Patents;13,700.00;210 Accounts;Payable;46,849.12;221 Employee?s;Income Tax Payable;15,812.27;222 FICA Tax;Payable;9,143.73;223 Federal;Unemployment Tax Payable;319.19;224 State;Unemployment Tax Payable;406.22;225 Property Tax;Payable;6,321.00;226 Income Tax;Payable;7,423.36;310 Common Stock;($10 Par);375,000.00;311 Paid-In Capital;in Excess of Par ? Common Stock;55,000.00;312 Retained;Earnings;114,106.95;Totals;$ 756,297.38 756,297.95;Bath Designs Inc.;Schedule of Accounts;Receivable;January 1, 20;Bright Interior Systems;$13,275.44;Hughes Building Company;3,240.00;Kian Corporation;8,431.00;Pickens Contractors;2,173.00;Powell Contractors Inc. 22,941.61;Ruth Builder;19,713.00;Ryan Sales Company;7,214.97;Tarara Design Corpation;10,622.00;Total;87,611.02;Schedule of Accounts Pay;January 1, 20;Foley Tool Company;$18,622.00;Liberty Wood Products Company;8,413.12;Ohio Plastics Company;10,714.00;Rorick Hardware Inc.;9,100.00;Total $46,849.12


Paper#38295 | Written in 18-Jul-2015

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