Question;?? GA Southern? COURSEACCT 3231, Spring 2013End-of-Period;Procedures for Manufacturing Companies;This;assignment covers selected end-of-period procedures for manufacturing;companies. There are several important considerations for completing this;assignment;?;Periodic Inventory;System. The Mann Manufacturing Company uses;the periodic inventory system. This means that material purchases are debited;to a Purchases account rather than to the Materials Inventory account. The;amount of material used is not determined until the end-of-period closing;process is performed. In addition, no entry is made to record an increase in;cost of goods sold expense and a decrease in inventory when goods are sold.;Instead, cost of goods sold expense is manually calculated at the end of the;period.;?;Actual Costing System.;The company uses actual costing instead of normal costing. This means that the;company does not apply overhead to production using a pre-determined overhead;rate (POR).;?;No Work-in-Process.;The company builds its product one unit at a time and therefore does not have;work in process (i.e., no partial units). Since there is no Work in Process;account, the costs that are normally debited to the Work in Process account are;accounted for as follows: a) materials used are accounted for as described;above, b) direct labor costs are recorded in separate general ledger accounts;by department, and c) actual overhead costs are recorded in sub-ledger accounts;as described below.;?;Overhead Sub-Ledgers.;The company maintains separate sub-ledgers for its variable and fixed overhead;costs. Therefore, the company only maintains two overhead control accounts in;the General Ledger: Variable Manufacturing Overhead Control and Fixed;Manufacturing Overhead Control. The Variable Overhead sub-leger contains the;following four accounts: Utilities, Repairs and maintenance, Factory supplies;and Material spoilage loss. The Fixed Overhead sub-Ledger contains the;following nine accounts: Factory supplies, Fixed direct labor, Utilities;Production planning and control, Purchasing and receiving costs, Factory;insurance, Depreciation, production equipment && tools;Depreciation;building, and Factory workers? training cost.;?;Absorption Costing.;The company uses traditional absorption costing, which means that it treats;direct materials, direct labor and both variable and fixed overhead as product;costs while S&A costs (both variable and fixed) are accounted for as period;costs.;The;end-of-period procedures for a manufacturing company are similar to those of;other companies with the exception that manufacturing companies have multiple;inventories, cost of goods manufactured expense, and a significant number of;additional accounts. Here is a very high level summary of the typical;procedures;?;Unadjusted trial balance;?;Adjusting entries;?;Adjusted trial balance;?;Financial Statements;?;Closing entries;?;Post-closing trial;balance;Many companies;employ a worksheet to facilitate this work.;INSTRUCTIONS;1.;A partially completed;worksheet has been provided. Note that the end-of-period adjustments have;already been entered so your starting point for this assignment is the adjusted;trial balance (also provided). The next step is to complete the Income;Statement and Balance Sheet sections of the worksheet (Columns J-M). Then you;will be ready to prepare the financial statements. The following guidance;should be considered in completing this step;a. Income statement;section: Transfer (from the adjusted trial;balance) all of the account balances that are needed to prepare the company?s;income statement. Note: In order to compute Cost of goods manufactured and Cost;of goods sold, you will need the ending Materials inventory balance (for CGM);and the ending Finished Goods inventory balance (for CGS). The ending balances;are as follows: Materials Inventory, $2,065,114, Finished Goods, $0. Once that;is done, the difference between the two income statement columns (J and K) will;represent net income (or net loss). Since earnings and loses impact Retained;Earnings, enter the net income (net loss) amount in the Income Statement debit;column (Income Summary row) and also in the Balance Sheet credit column (Income;Summary row). This has the effect of transferring the income (loss) from the;income statement to the balance sheet.;b.;Balance sheet section;Transfer (from the adjusted trial balance) all of the account balances that are;needed to prepare the company?s balance sheet. Important: Be sure to transfer;the ending Materials and Finished Goods inventory balances and not the;beginning balances. Finally, since the books have not yet been closed, the;balance in the Retained Earnings account is the beginning balance. When;preparing the statement, the ending balance will have to be computed by taking;into account the earnings (losses) for the period (refer to previous step) and;any dividends paid.;c.;At this point, the;company?s fourth quarter income statement and 12/31/X1 balance sheet can easily;be prepared from the worksheet. However, to save time, you are not required to;prepare these statements as part of this assignment.;2.;Complete the final two;sections of the worksheet to reflect the closing process. In a nutshell, you;will close all temporary accounts and then prepare a post-closing trial balance;to confirm that only permanent accounts remain open (that is, only permanent;accounts should have ending balances after the books have been closed). The;following guidance should be considered in completing this step;a.;First, transfer the;individual variable manufacturing overhead sub-ledger account balances to the;Variable Manufacturing OH control account and the individual fixed;manufacturing overhead sub-ledger account balances to the Fixed Manufacturing;Overhead control account;b.;Next, determine Cost of Goods;Manufactured;?;Transfer the beginning;Material inventory account balance to the Cost of Goods Manufactured account;?;Transfer the material;purchases and Freight-in accounts to the Cost of Goods Manufactured account;?;Transfer the variable;factory labor costs to the Cost of Goods Manufactured account;?;Transfer the balance in;the Variable Manufacturing OH control account to the Cost of Goods Manufactured;account;?;Transfer the balance in;the Fixed Manufacturing OH control account to the Cost of Goods Manufactured;account;?;Transfer the ending;Materials inventory account balance from the Cost of Goods Manufactured;account;c.;Now, determine Cost of;Goods Sold;?;Transfer the beginning;Finished Goods inventory account balance to the Cost of Goods Sold account;?;Transfer the Cost of;Goods Manufactured account balance to the Cost of Goods Sold account.;?;Transfer the ending;Finished Goods inventory account balance from the Cost of Goods Sold account;d.;Now you are ready to;determine the net income (net loss) by closing all revenue and expense accounts;to the temporary clearing account Income Summary;?;Transfer the revenue;account balance to Income Summary;?;Transfer the Cost of;Goods Sold control account balance to the Income Summary account;?;Transfer the operating;expense (Selling and Admin) account balances to Income Summary, and;?;Transfer the interest;expense and income taxes account balances to Income Summary;e.;Finally, close the;Income Summary account balance (which now reflects net income (net loss) to the;Retained Earnings account.;3.;The next step is to;journalize and post the adjusting and closing entries. The adjusting entries;have already been recorded in the General Journal and posted to the General;Ledger. Your task is to journalize and post the closing entries. Be sure to use;proper post-referencing notations (Ask your instructor for assistance if you;don?t remember how to do this.).;Finally, determine new;ending balances in all accounts affected by the closing process.;4.;Prepare a post-closing;trial balance as of January 1, 20X2 to confirm that all temporary accounts have;been closed and that the books are in balance for the new period. Since you;have already prepared a post-closing trial balance on the worksheet, all you;have to do for this step is to confirm that your ledger account balances match;the balances shown on the worksheet.
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