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MANUFACTURING ACCOUNTING: THE WORK SHEET AND FINANCIAL STATEMENTS

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1 MANUFACTURING ACCOUNTING: THE WORK SHEET AND FINANCIAL STATEMENTS
CHAPTER TWENTY-NINE MANUFACTURING ACCOUNTING: THE WORK SHEET AND FINANCIAL STATEMENTS

2 MANUFACTURING WORK SHEET
Preparation is similar to the worksheet of a merchandising business: Step #1 - Prepare the trial balance. Step #2 - Prepare the adjustments. Step #3 - Prepare the adjusted trial balance. Step #4 - Extend the adjusted trial balance. amounts to the Income Statement and Balance Sheet columns. Step #5 - Total the Income Statement and Balance Sheet columns to compute the net income or net loss.

3 TRIAL BALANCE ADJUSTMENTS ACCOUNT TITLE DEBIT CREDIT DEBIT CREDIT Cash 25,763 Government Notes 5,000 Accounts Receivable 66,485 Allowance for Bad Debts 460 Finished Goods Inventory 35,614 Work in Process Inventory 9,990 Trial Balance is prepared using the balances from the General Ledger accounts. Materials Inventory 9,275 Factory Supplies 5,542 Prepaid Insurance 8,060 Land 40,000 Factory Building 178,000 Accum. Depr. Factory Bldg 30,000 Factory Equipment 155,000 Accum. Depr. Factory Eq 40,640 Office Equipment 21,300 Accum. Depr. Office Eq 4,925 Interest Payable Accounts Payable 39,685 Corp. Income Tax Payable Bonds Payable 100,000 Capital Stock 75,000

4 TRIAL BALANCE ADJUSTMENTS ACCOUNT TITLE DEBIT CREDIT DEBIT CREDIT Cash 25,763 Government Notes 5,000 Accounts Receivable 66,485 Allowance for Bad Debts 460 Finished Goods Inventory 35,614 Work in Process Inventory 9,990 Manufacturing Companies have three inventory accounts. Materials Inventory 9,275 Factory Supplies 5,542 Prepaid Insurance 8,060 Land 40,000 Factory Building 178,000 Accum. Depr. Factory Bldg 30,000 Factory Equipment 155,000 Accum. Depr. Factory Eq 40,640 Office Equipment 21,300 Accum. Depr. Office Eq 4,925 Interest Payable Accounts Payable 39,685 Corp. Income Tax Payable Bonds Payable 100,000 Capital Stock 75,000

5 Since this company uses the perpetual method, Cost of Goods Sold
Paid-in Capital 20,000 Retained Earnings 132,690 Cash Dividends 15,000 Sales 835,948 Interest Revenue 430 Factory Overhead 155,080 185,982 Since this company uses the perpetual method, Cost of Goods Sold is recorded as goods are sold. Cost of Goods Sold 601,581 Wages Expense 91,316 Advertising Expense 5,264 Bad Debt Expense Utilities Expense - Office 5,690 Depr. Expense - Office Eq. Interest Expense 8,800 Income Tax Expense On a perpetual method worksheet, the inventory accounts reflect the ending rather than beginning balances 23,000 1,465,760 1,465,760

6 Paid-in Capital 20,000 Retained Earnings 132,690 Cash Dividends 15,000 Sales 835,948 Interest Revenue 430 Factory Overhead 155,080 185,982 Actual overhead costs incurred Cost of Goods Sold 601,581 Wages Expense 91,316 Advertising Expense 5,264 Bad Debt Expense Utilities Expense - Office 5,690 Depr. Expense - Office Eq. Interest Expense 8,800 Income Tax Expense 23,000 1,465,760 1,465,760

7 Utilities Expense - Office 5,690 Depr. Expense - Office Eq.
Paid-in Capital 20,000 Retained Earnings 132,690 Cash Dividends 15,000 Sales 835,948 Interest Revenue 430 Factory Overhead 155,080 185,982 Overhead applied to production Cost of Goods Sold 601,581 Wages Expense 91,316 Advertising Expense 5,264 Bad Debt Expense Utilities Expense - Office 5,690 Depr. Expense - Office Eq. Interest Expense 8,800 Both overhead amounts are shown since both are useful in preparing financial statements. Income Tax Expense 23,000 1,465,760 1,465,760

8 Paid-in Capital 20,000 Retained Earnings 132,690 Cash Dividends 15,000 Sales 835,948 Interest Revenue 430 Factory Overhead 155,080 185,982 Cost of Goods Sold 601,581 Wages Expense 91,316 Advertising Expense 5,264 Bad Debt Expense Corporations pay taxes. Utilities Expense - Office 5,690 Depr. Expense - Office Eq. Interest Expense 8,800 Income Tax Expense 23,000 1,465,760 1,465,760

9 to jobs still in process
ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 Prepaid Ins 8,060 Applying overhead to jobs still in process at year end Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 Factory Eq 155,000 A/D Factory Eq 40,640 Office 21,300 A/D Office Eq 4,925 Interest Pay Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

10 Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 a 2,700 COGS 601,581 Wages Exp 91,316 Applied overhead is credited to the Factory Overhead account. Adv. Exp 5,264 Bad Debts Exp Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 Inc. Tax Exp 23,000 1,465,760 1,465,760

11 ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 b 5,020 Prepaid Ins 8,060 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 Factory supplies used during the year Factory Eq 155,000 A/D Factory Eq 40,640 Office 21,300 A/D Office Eq 4,925 Interest Pay Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

12 Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 COGS 601,581 Wages Exp 91,316 Adv. Exp 5,264 Factory Supplies are part of Factory Overhead. Bad Debts Exp Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 Inc. Tax Exp 23,000 1,465,760 1,465,760

13 ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 b 5,020 Prepaid Ins 8,060 c 6,520 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 Factory Eq 155,000 Expired Insurance A/D Factory Eq 40,640 Office 21,300 A/D Office Eq 4,925 Interest Pay Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

14 Insurance is also part of
Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 COGS 601,581 Wages Exp 91,316 Insurance is also part of Factory Overhead. Adv. Exp 5,264 Bad Debts Exp Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 Inc. Tax Exp 23,000 1,465,760 1,465,760

15 This year’s depreciation
ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 b 5,020 Prepaid Ins 8,060 c 6,520 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 d 7,500 Factory Eq 155,000 A/D Factory Eq 40,640 d 13,500 Office 21,300 A/D Office Eq 4,925 This year’s depreciation on Factory building and equipment Interest Pay Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

16 Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 COGS 601,581 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp $7,500 + $13,500 Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 Inc. Tax Exp 23,000 1,465,760 1,465,760

17 FACTORY OVERHEAD FACTORY OVERHEAD Application to Work in Process
155,080 185,982 (a) 2,700

18 FACTORY OVERHEAD FACTORY OVERHEAD Factory Supplies 155,080 185,982 (b)
5,020 (a) 2,700

19 FACTORY OVERHEAD FACTORY OVERHEAD 155,080 185,982 (b) 5,020 (a) 2,700
Insurance (c) 6,520

20 FACTORY OVERHEAD FACTORY OVERHEAD 155,080 185,982 (b) 5,020 (a) 2,700
6,520 Depreciation (d) 21,000

21 More overhead was applied than was actually incurred.
FACTORY OVERHEAD FACTORY OVERHEAD 155,080 185,982 (b) 5,020 (a) 2,700 (c) 6,520 (d) 21,000 187,620 188,682 More overhead was applied than was actually incurred.

22 Account is adjusted for the overapplied overhead.
FACTORY OVERHEAD FACTORY OVERHEAD 155,080 185,982 (b) 5,020 (a) 2,700 (c) 6,520 (d) 21,000 187,620 188,682 (e) 1,062 Account is adjusted for the overapplied overhead. 188,682

23 Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp Cost of Goods Sold is reduced by the overage. Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 Inc. Tax Exp 23,000 1,465,760 1,465,760

24 Accrued interest on the
Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 f 800 Inc. Tax Exp 23,000 1,465,760 1,465,760 Accrued interest on the Bonds Payable

25 ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 b 5,020 Prepaid Ins 8,060 c 6,520 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 d 7,500 Factory Eq 155,000 A/D Factory Eq 40,640 d 13,500 Office 21,300 A/D Office Eq 4,925 Interest Pay f 800 Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

26 Estimated uncollectible
ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 g 1,405 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Estimated uncollectible accounts at year end Materials Inv 9,275 Factory Supp 5,542 b 5,020 Prepaid Ins 8,060 c 6,520 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 d 7,500 Factory Eq 155,000 A/D Factory Eq 40,640 d 13,500 Office 21,300 A/D Office Eq 4,925 Interest Pay f 800 Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

27 Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp g 1,405 Utilities Exp 5,690 Depr Exp-Of Eq Interest Exp 8,800 f 800 Inc. Tax Exp 23,000 1,465,760 1,465,760

28 This year’s depreciation
ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 g 1,405 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 This year’s depreciation on Office Equipment b 5,020 Prepaid Ins 8,060 c 6,520 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 d 7,500 Factory Eq 155,000 A/D Factory Eq 40,640 d 13,500 Office 21,300 A/D Office Eq 4,925 h 2,000 Interest Pay f 800 Accounts Pay 39,685 Corp. I. Tax Pay Bonds Pay 100,000 Capital Stock 75,000

29 Since this was depreciation on the
Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp g 1,405 Utilities Exp 5,690 Depr Exp-Of Eq h 2,000 Interest Exp 8,800 f 800 Inc. Tax Exp 23,000 1,465,760 1,465,760 Since this was depreciation on the Office (not Factory) Equipment it is not part of factory overhead.

30 Total Income Tax for the year is $30,300….
Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp g 1,405 Utilities Exp 5,690 Depr Exp-Of Eq h 2,000 Interest Exp 8,800 f 800 Inc. Tax Exp 23,000 i 7,300 1,465,760 1,465,760 Total Income Tax for the year is $30,300…. $23,000 has already been recorded…. additional $7,300 adjustment needed.

31 ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 Gov’t Notes 5,000 Accts Rec. 66,485 All. for Bad Debts 460 g 1,405 Finished Gd Inv 35,614 Work in Proc Inv 9,990 a 2,700 Materials Inv 9,275 Factory Supp 5,542 b 5,020 Prepaid Ins 8,060 c 6,520 Land 40,000 Factory Bldg 178,000 A/D Factory Bldg 30,000 d 7,500 Factory Eq 155,000 A/D Factory Eq 40,640 d 13,500 Office 21,300 A/D Office Eq 4,925 h 2,000 Interest Pay f 800 Accounts Pay 39,685 Corp. I. Tax Pay i 7,300 Bonds Pay 100,000 Capital Stock 75,000

32 After Adjustments column is balanced…Adjusted Trial Balance
Paid-in Capital 20,000 Ret. Earnings 132,690 Cash Div. 15,000 Sales 835,948 Interest Rev 430 Factory OH 155,080 185,982 b 5,020 a 2,700 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp g 1,405 Utilities Exp 5,690 Depr Exp-Of Eq h 2,000 Interest Exp 8,800 f 800 Inc. Tax Exp 23,000 i 800 1,465,760 1,465,760 47,807 47,807 After Adjustments column is balanced…Adjusted Trial Balance is prepared.

33 ACCOUNT TITLE TRIAL BAL ADJ. ADJ. T/B DR CR DR CR DR CR Cash 25,763 25,763 Gov’t Notes 5,000 5,000 Accts Rec. 66,485 66,485 All. for Bad Debts 460 g 1,405 1,865 Finished Gd Inv 35,614 35,614 Work in Proc Inv 9,990 a 2,700 12,690 Materials Inv 9,275 9,275 Factory Supp 5,542 b 5,020 522 Prepaid Ins 8,060 c 6,520 1,540 Land 40,000 40,000 Factory Bldg 178,000 178,000 A/D Factory Bldg 30,000 d 7,500 37,500 Factory Eq 155,000 155,000 A/D Factory Eq 40,640 d 13,500 54,140 Office 21,300 21,300 A/D Office Eq 4,925 h 2,000 6,925 Interest Pay f 800 800 Accounts Pay 39,685 39,685 Corp. I. Tax Pay i 7,300 7,300 Bonds Pay 100,000 100,000 Capital Stock 75,000 75,000

34 Paid-in Capital 20,000 20,000 Ret. Earnings 132,690 132,690 Cash Div. 15,000 15,000 Sales 835,948 835,948 Interest Rev 430 430 Factory OH 155,080 185,982 b 5,020 a 2,700 188,682 188,682 c 6,520 d 21,000 e 1,062 COGS 601,581 e 1,062 600,519 Wages Exp 91,316 91,316 Adv. Exp 5,264 5,264 Bad Debts Exp g 1,405 1,405 Utilities Exp 5,690 5,690 Depr Exp-Of Eq h 2,000 2,000 Interest Exp 8,800 f 800 9,600 Inc. Tax Exp 23,000 i 800 30,300 1,465,760 1,465,760 47,807 47,807 1,500,965 1,500,965

35 The Adjusted Trial Balance amounts are extended to the
ACCOUNT TITLE ADJ. T/B INCOME STMT BAL. SHEET DR CR DR CR DR CR Cash 25,763 25,763 Gov’t Notes 5,000 5,000 Accts Rec. 66,485 66,485 All. for Bad Debts 1,865 1,865 Finished Gd Inv 35,614 35,614 Work in Proc Inv 12,690 12,690 Materials Inv 9,275 9,275 Factory Supp 522 522 Prepaid Ins 1,540 The Adjusted Trial Balance amounts are extended to the Income Statement and Balance Sheet columns. 1,540 Land 40,000 40,000 Factory Bldg 178,000 178,000 A/D Factory Bldg 37,500 37,500 Factory Eq 155,000 155,000 A/D Factory Eq 54,140 54,140 Office 21,300 21,300 A/D Office Eq 6,925 6,925 Interest Pay 800 800 Accounts Pay 39,685 39,685 Corp. I. Tax Pay 7,300 7,300 Bonds Pay 100,000 100,000 Capital Stock 75,000 75,000

36 Factory Overhead is not extended because its
Paid-in Capital 20,000 20,000 Ret. Earnings 132,690 132,690 Cash Div. 15,000 15,000 Sales 835,948 835,948 Interest Rev 430 430 Factory OH 188,682 188,682 COGS 600,519 Factory Overhead is not extended because its balance is zero, since all of the actual overhead costs have been applied. Wages Exp 91,316 Adv. Exp 5,264 Bad Debts Exp 1,405 Utilities Exp 5,690 Depr Exp-Of Eq 2,000 Interest Exp 9,600 Inc. Tax Exp 30,300 1,500,965 1,500,965

37 Paid-in Capital 20,000 20,000 Ret. Earnings 132,690 132,690 Cash Div. 15,000 15,000 Sales 835,948 835,948 Interest Rev 430 430 Factory OH 188,682 188,682 COGS 600,519 600,519 Wages Exp 91,316 91,316 Adv. Exp 5,264 5,264 Bad Debts Exp 1,405 1,405 Utilities Exp 5,690 5,690 Depr Exp-Of Eq 2,000 2,000 Interest Exp 9,600 9,600 Inc. Tax Exp 30,300 30,300 1,500,965 1,500,965 746,094 836,378 566,189 475,905 90,284 90,284 Net Income is computed and the work sheet is finished. 836,378 836,378 566,189 566,189

38 MANUFACTURING FINANCIAL STATEMENTS
INCOME STATEMENT RETAINED EARNINGS STATEMENT BALANCE SHEET STATEMENT OF CASH FLOWS Same as merchandising businesses

39 ToyJoy Manufacturing Co
ToyJoy Manufacturing Co. Income Statement For Year Ended December 31, 20-- Net sales $835,948 Less cost of goods sold: Finished goods inventory, January 1 $ 24,569 Cost of goods manufactured 611,564 From Schedule of Cost of Goods Manufactured

40 ToyJoy Manufacturing Co
ToyJoy Manufacturing Co. Schedule of Cost of Goods Manufactured For Year Ended December 31, 20-- Work in process, January 1 $ 11,940 Materials inventory, January 1 $ 12,992 Materials purchases 121,380 Materials available for use $ 134,372 Materials inventory, December 31 9,275 Cost of materials used $ 125,097 Direct labor 299,597 Factory Overhead 187,620 Total manufacturing costs 612,314 Total work in process during the period $624,254 Work in process, December 31 12,690 Cost of goods manufactured $611,564

41 ToyJoy Manufacturing Co
ToyJoy Manufacturing Co. Income Statement For Year Ended December 31, 20-- Net sales $835,948 Less cost of goods sold: Finished goods inventory, January 1 $ 24,569 Cost of goods manufactured 611,564 Cost of goods available for sale $636,133 Finished goods inventory, Dec. 31 35,614 Cost of goods sold 600,519 Gross profit $235,429 Operating expenses: Wages expense $ 91,316 Advertising expense 5,264 Bad debts expense 1,405 Utilities expense - office 5,690 Depreciation expense - office equip. 2,000

42 Net Income is then carried to the Retained Earnings Statement.
Depreciation expense - office equip. 2,000 Total operating expenses 105,675 Operating income $129,754 Other revenue: Interest revenue 430 $130,184 Other expense: Interest expense 9,600 Income before income taxes $120,584 Corporate income tax 30,300 Net income $ 90,284 Net Income is then carried to the Retained Earnings Statement.

43 ToyJoy Manufacturing Co
ToyJoy Manufacturing Co. Retained Earnings Statement For the Year Ended December 31, 20-- Retained earnings, January 1 $ 132,690 Net income for the year (after provision for income taxes of $30,300) 90,284 From the Income Statement

44 ToyJoy Manufacturing Co
ToyJoy Manufacturing Co. Retained Earnings Statement For the Year Ended December 31, 20-- Retained earnings, January 1 $ 132,690 Net income for the year (after provision for income taxes of $30,300) 90,284 $ 222,974 Less cash dividends ($1.00 per share) 15,000 Retained earnings, December 31 $ 207,974 To Balance Sheet

45 ToyJoy Manufacturing Co. Balance Sheet December 31, 20--
Assets Current assets: Cash $ 25,763 Government notes 5,000 Accounts receivable $ 66,485 Less allowance for bad debts 1,865 $ 64,620 Inventories: Finished goods $ 35,614 Work in process 12,690 Materials 9,275 57,579 Factory supplies 522 Prepaid insurance 1,540 Total current assets $155,024 Property, plant and equipment:

46 Property, plant and equipment:
Land $ 40,000 Factory building $ 178,000 Less accumulated depreciation 37,500 140,500 Factory equipment $ 155,000 Less accumulated depreciation 54,140 100,860 Office equipment $ 21,300 Less accumulated depreciation 6,925 14,375 Total property, plant and equipment 295,735 Total assets $450,759 Liabilities Current liabilities: Interest payable $ Accounts payable 39,685 Corporate income tax payable 7,300 Total current liabilities $ 47,785 Long-term liabilities: Bonds payable 100,000 Total liabilities $ 147,785

47 Total liabilities $147,785 Stockholders’ Equity Common stock ($5 par value, 50,000 $ 75,000 sh. authorized, 15,000 sh. issued) Paid-in capital in excess of par 20,000 Retained earnings 54,140 Total stockholder’s equity 302,974 Total liabilities and stockholders’ equity $450,759 From the Retained Earnings Statement

48 GENERAL JOURNAL Adjusting Entries DATE DESCRIPTION DEBIT PR CREDIT 1 2
3 4 From the Adjustments columns of the work sheet 5 6 7 8 9 10 11

49 is coded with the letter
GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1 Adjusting Entries 20-- 2 Dec 31 3 (a) 4 5 Each adjusting entry is coded with the letter from the work sheet. 6 7 8 9 10 11

50 Only posted to the control account, not the subsidiary ledger accounts
GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1 Adjusting Entries 20-- 2 Dec 31 Work in Process Inventory 2,700 3 (a) Factory Overhead 2,700 4 5 Only posted to the control account, not the subsidiary ledger accounts 6 7 8 9 10 11

51 GENERAL JOURNAL Adjusting Entries DATE DESCRIPTION DEBIT PR CREDIT 1
20-- 2 Dec 31 Work in Process Inventory 2,700 3 (a) Factory Overhead 2,700 4 5 (b) 31 Factory OH (Factory Sup. Exp.) 5,020 6 Factory Supplies 5,020 7 8 (c) 31 Factory OH (Factory Bldg. and 9 Equipment, Insurance Exp.) 6,520 10 Prepaid Insurance 6,520 11

52 12 (d) 31 Factory OH (Depr. Exp- 13 Factory Bldg. and Equip.) 21,000 14 Acc. Depr. - Factory Eq 13,500 15 Acc. Depr. - Factory Bldg 7,500 16 17 (e) 31 Factory Overhead 1,062 18 Cost of Goods Sold 1,062 19 20 (f) 31 Interest Expense 800 21 Interest Payable 800 22 23 (g) 31 Bad Debts Expense 1,405 24 Allow. For Bad Debts 1,405 25 26 (h) 31 Depr. Expense - Office Equip. 2,000 27 Acc. Depr. - Office Equip. 2,000 28 29

53 30 (h) 31 Depr. Expense - Office Equip. 2,000 31 Acc. Depr. - Office Equip. 2,000 32 33 (i) 31 Income Tax Expense 7,300 34 Corporate Income Tax Pay. 7,300 35 36 37 38 39 40 41 42 43 44 45 46 47

54 GENERAL JOURNAL Closing Entries DATE DESCRIPTION DEBIT PR CREDIT 1 2 3
Six steps 4 5 6 7 8 9 10 11

55 GENERAL JOURNAL Closing Entries DATE DESCRIPTION DEBIT PR CREDIT 1
20-- 2 Dec 31 Income Summary 188,682 3 (1) Factory OH (Subs. ledger accts) 188,682 4 5 6 STEP #1 Transfer the debit balance in the factory overhead account to Income Summary and close the subsidiary factory overhead accounts. 7 8 9 10 11

56 GENERAL JOURNAL Closing Entries DATE DESCRIPTION DEBIT PR CREDIT 1
20-- 2 Dec 31 Income Summary 188,682 3 (1) Factory OH (Subs. ledger accts) 188,682 4 5 (2) 31 Factory Overhead 188,682 6 Income Summary 188,682 7 8 STEP #2 Transfer the credit balance in the factory overhead account to Income Summary. 9 10 11

57 GENERAL JOURNAL Closing Entries DATE DESCRIPTION DEBIT PR CREDIT 1
20-- 2 Dec 31 Income Summary 188,682 3 (1) Factory OH (Subs. ledger accts) 188,682 STEP #3 Transfer the balances of the sales and interest revenue accounts to Income Summary. 4 5 (2) 31 Factory Overhead 188,682 6 Income Summary 7 8 (3) 31 Sales 835,948 9 Interest Revenue 430 10 Income Summary 836,378 11

58 Utilities Expense - Office 5,690 18 Depr. Exp. - Office Equip. 2,000
12 (4) 31 Income Summary 746,094 13 Cost of Goods Sold 600,519 14 Wages Expense 91,316 15 Advertising Expense 5,264 16 Bad Debts Expense 1,405 17 Utilities Expense - Office 5,690 18 Depr. Exp. - Office Equip. 2,000 19 Interest Expense 9,600 20 Income Tax Expense 30,300 21 22 23 24 25 STEP #4 Transfer the balances of the cost of goods sold and all expense accounts to Income Summary. 26 27 28 29

59 Transfer the balances of Income Summary
12 (4) 31 Income Summary 746,094 13 Cost of Goods Sold 600,519 14 Wages Expense 91,316 15 Advertising Expense 5,264 16 Bad Debts Expense 1,405 17 Utilities Expense - Office 5,690 18 Depr. Exp. - Office Equip. 2,000 19 Interest Expense 9,600 20 Income Tax Expense 30,300 21 22 (5) 31 Income Summary 90,284 23 Retained Earnings 90,284 24 25 26 STEP #5 Transfer the balances of Income Summary to Retained Earnings. 27 28 29

60 Transfer the balances of Cash Dividends to Retained Earnings.
12 (4) 31 Income Summary 746,094 13 Cost of Goods Sold 600,519 14 Wages Expense 91,316 15 Advertising Expense 5,264 16 Bad Debts Expense 1,405 17 Utilities Expense - Office 5,690 18 Depr. Exp. - Office Equip. 2,000 19 Interest Expense 9,600 20 Income Tax Expense 30,300 21 22 (5) 31 Income Summary 90,284 23 Retained Earnings 90,284 24 25 (6) 31 Retained Earnings 15,000 26 Cash Dividends 15,000 27 STEP #6 Transfer the balances of Cash Dividends to Retained Earnings. 28 29

61 GENERAL JOURNAL Reversing Entries DATE DESCRIPTION DEBIT PR CREDIT 1
20-- 2 Jan 1 Interest Payable 800 3 (1) Interest Expense 800 4 5 (2) 1 Factory Overhead 2,700 6 Work in Process Inventory 2,700 7 The application of overhead to work in process is reversed so that the overhead can be applied as the products are completed. 8 9 10 11

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