Bath Designs Inc_Journal to Final Accounts

$53.00

Description

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

Reviews

There are no reviews yet.

Be the first to review “Bath Designs Inc_Journal to Final Accounts”

Your email address will not be published. Required fields are marked *