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    Job Order Costing & Analysis

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    Swisher Company's computer system generated the following trial balance on December 31, 2013. The company's manager knows that the trial balance is wrong because it does not show any balance for Goods in Process Inventory but does show balances for the Factory Payroll and Factory Overhead accounts.

    Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,000
    Accounts receivable . . . . . . . . . . . . . . . 42,000
    Raw materials inventory . . . . . . . . . . . . 26,000
    Goods in process inventory . . . . . . . . . 0
    Finished goods inventory . . . . . . . . . . . 9,000
    Prepaid rent . . . . . . . . . . . . . . . . . . . . . 3,000
    Accounts payable . . . . . . . . . . . . . . . . . $ 10,500
    Notes payable . . . . . . . . . . . . . . . . . . . . 13,500
    Common stock . . . . . . . . . . . . . . . . . . . 30,000
    Retained earnings . . . . . . . . . . . . . . . . . 87,000
    Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000
    Cost of goods sold . . . . . . . . . . . . . . . . 105,000
    Factory payroll . . . . . . . . . . . . . . . . . . . 16,000
    Factory overhead . . . . . . . . . . . . . . . . . 27,000
    Operating expenses . . . . . . . . . . . . . . . 45,000
    Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . $321,000 $321,000

    After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

    Materials requisition 94-231: $4,600 direct materials to Job 603
    Materials requisition 94-232: $7,600 direct materials to Job 604
    Materials requisition 94-233: $2,100 indirect materials
    Labor time ticket 765: $5,000 direct labor to Job 603
    Labor time ticket 766: $8,000 direct labor to Job 604
    Labor time ticket 777: $3,000 indirect labor

    Jobs 603 and 604 are the only units in process at year-end. The predetermined overhead rate is 200% of direct labor cost.

    Required
    1. Use information on the six source documents to prepare journal entries to assign the following costs.
    a. Direct materials costs to Goods in Process Inventory.
    b. Direct labor costs to Goods in Process Inventory.
    c. Overhead costs to Goods in Process Inventory.
    d. Indirect materials costs to the Factory Overhead account.
    e. Indirect labor costs to the Factory Overhead account.

    2. Determine the revised balance of the Factory Overhead account after making the entries in part 1. Determine whether there is under- or overapplied overhead for the year. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold, assuming the amount is not material.

    3. Prepare a revised trial balance.

    4. Prepare an income statement for year 2013 and a balance sheet as of December 31, 2013.

    Analysis Component
    5. Assume that the $2,100 indirect materials on materials requisition 94-233 should have been direct materials charged to Job 604. Without providing specific calculations, describe the impact of this error on the income statement for 2013 and the balance sheet at December 31, 2013.

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    Solution Summary

    Job order costing and analysis are provided. Process inventory computer systems for trial balances are given.

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