Introduction The transactions in this practice set were completed by Hydro Paddle Boards, Inc. durin 1 answer below »

Introduction

The transactions in this practice set were completed by Hydro Paddle Boards, Inc. during January, the first month of the companyAc€?cs fiscal year. Hydro Paddle Boards, Inc. is a manufacturing corporation that designs and manufactures a limited variety of custom stand up paddle (SUP) boards. The SUP boards vary in size and performance, including beginner, intermediate, advanced, competition, and racing boards.

Hydro Paddle Boards maintains a job-order cost system.

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You have accepted a position with Hydro Paddle Boards, 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 dealers and other builders. You are responsible for the daily accounting operations, preparation of interim financial statements, and end-of-month adjusting and closing entries.

Hydro Paddle Boards, 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 nonfactory personnel are recorded at the end of each month by a debit to the appropriate salary expense accounts. Deductions for employees’ FICA and federal income taxes are recorded whenever gross pay is recorded, using the simplified rates of 7.5% (for FICA, including Medicare) and 15% (for federal income tax). 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.

Hydro Paddle Boards, 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. Hydro Paddle Boards, 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.

Hydro Paddle Boards, Inc. marks up all work by 40% of the job cost. Refer to the individual Job Cost Record for the total cost of the job and multiply the total cost by 140% to determine the selling price for each job.

Since Hydro Paddle Boards, Inc. sells to dealers, 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 expect 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 teh company name in the General Journal and post to the Accounts Receivable or Accounts Payable Ledger.

Its is January 1, and you are ready to assume your new responsibilities.

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.

2. Post the General Journal entries to the General Ledger, the Accounts Payable Ledger, and the Accounts Receivable Ledger.

3. Prepare Schedules of Accounts Receivable and Accounts Payable.

4. Prepare a Schedule of Unfinished Jobs.

5. Prepare the Trial Balance section of the work sheet.

6. Complete the work sheet using the adjusting entries data for the adjustment columns.

7. Prepare the Following statements:

a. Income Statement

b. Retained Earnings Statement

c. Balance Sheet.

8. Journalize and post the adjusting entries.

9. Journalize and post the closing entries. (It is acknowledged that this step is not preformed until year end; this is for instructional purposes only.)

10. Prepare a Post-Closing Trial Balance.

Jan. 2 Paid Salt Water Mall $7,200.00 for January rent. Of this amount, 30% is for office facilities and 70% is for factory facilities.

2.      Paid RWT Advertising Agency $980.00 for preparing advertisements in local newspaper.

3.      Paid Hi-Foam Products Company $16,826.24 in payment of December 31 balance.

3.      Received a check from Calm Waters Board Corporation for the amount due within the discount period.

4.      Paid Marine National Bank $45,733.48 for December payroll taxes payable as follows:

Employees’ Income Tax Payable, $26,353.78; FICA Tax Payable $17,928.88; Federal Unemployment Tax , $812.44.

4.      Paid $14,846.72 for Income Tax Payable.

4.      Paid Coco PVC Company $21,428.00 in Payment of the December 31 balance.

4.      Applied $7,248.00 of direct materials (1676) and $16,240.00 of direct labor (time ticket No. 258.) to Job No. 1403, which will complete the job. Use the simplified rates of 7.5% of gross pay fro employeesAc€?c FICA tax and 15% of gross pay for employeesAc€?c federal income tax. When preparing the entry for applying direct labor, debit Work in Process for the gross pay, and credit EmployeesAc€?c Income Taxes 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. 1403 is based upon 125% of direct labor cost.

Jan. 4.                Transferred the completed Job. 1403 to the appropriate customer. All sales are on account 1/10, net 30 days, FOB shipping point. Hydro Paddle Boards, Inc. marks up all work for by 40% of the job cost. 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.

Hydro Paddle Boards, 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.

8.      Requisitioned $2,482.54 of indirect materials and factory supplies to eh used in the manufacture of all jobs currently in process. (Materials Requisition N. 1680).

9.      Paid Anabella Henriquez County Tax Collector, $12,642.00 for property taxes accrued as of December 31.

9.      Purchased from GT Matrix Corporation $4,468.52 of indirect factory supplies, credit terms net 15 days.

9. Accepted a job for the manufacture of 66 units B1 (Beginning SUP) paddle boards for Rio Watersports. The promise date is February 14. The company began the job today, applying $11,828.00 of direct materials to Job No. 1406. (Materials Requisition No. 1681.)

10. Received a check from Tarpon Sports Ltd. For the amount due within the discount period.

Jan. 11 Paid Light Hardware, Inc. $18,200.00 in payment of the December 31 balance.

         11. Applied $2,654.28 of direct materials to Job No. 1402. (Materials Requisition No. 1682.)

12. Received a check from Go Paddle Sales Company for the amount due after the discount period has expired.

15. Applied $4,428.12 of direct materials to Job No. 1404. (Materials Requisition No. 1683).

16. Purchased $1, 006.00 of factory supplies from Keyz Supplies Inc. and paid cash.

16. Applied $6,434.00 of direct labor to Job No. 1405, which will complete the job. (Time Ticket No. 260).

Applied factory overhead using the appropriate rate.

Transferred the completed job to the finished goods account.

16. Sold one Standard C1 (Competition) custom stand up paddle (SUP) board to ta cash customer for $2,800.00. The Cost of the goods shipped from finished goods inventory was $2,000.00.

17. Requisitioned $2,235.00 of indirect materials and factory supplies to be used in all factory jobs currently in process. (Materials Requisition No. 1684).

17. Signed a contract with Extreme Board Systems for the manufacture of 77 units R1 (Racing 1) custom stand up paddle (SUP) boards. The promise date is February 15. The Company began the job today, applying $8,440.000 of direct materials to Job No. 1407). (Materials Requisition No. 1685).

17. Paid the sales manager of Hydro Paddle Boards, Inc. $285.24 for customer entertaining.

18. Received a report from the treasurer that Blue Runner Sports Dealers, one of our customers, has declared bankruptcy. Wrote off the balance owed to Hydro Paddle Boards, Inc. by Blue Runner Sports Dealers.

18. Sold and shipped Job No. 1405 to the appropriate customer. Refer to that jobAc€?cs Cost Record for the total cost of the job to determine the selling price.

22. Purchased $20,464.32 of direct materials from K.C. Epoxy Supply Company, credit terms net 30 days.

22. Accepted a job for the manufacture of 28 units R2 (Racing 2Ac€??SUP) for Flour Oceanic Designers. The promise date is January 31. The Company began the job today, applying $4,936.20 of direct materials to Job No. 1408. (Materials Requisition No. 1686).

January 24. Paid GT Matrix Corporation the amount due today form the January 9 purchase.

25. Applied $3,320.00 of direct labor to Job No. 1402, which will complete the job. (Time Ticket No. 262).

Applied factory overhead using the appropriate rate.

Transferred the completed job to the finished goods account.

26. Sold and shipped Job No. 1402 to the appropriate customer. Refer to that jobAc€?cs Cost Record for the total cost of the job to determine the selling price.

26. Applied $7,280.00 of direct labor to Job No. 1408, which will complete the job. (Time No. 264).

Applied factory overhead using the appropriate rate.

Transferred the completed job to the finished goods account.

29. Sold shipped Job No. 1408 to the appropriate customer. Refer to the Job Cost Record for the total cost of the job for billing purposes.

29. Paid D H20 Corp. amount due in payment of the January 1 balance.

29. Received a check from HP SUP Inc. for the amount due after the discount period has expired.

29. Paid Post Office $1,000.00 for postage added to postage meter. Expense this amount.

29. Paid Telephone Company $500.00 for January phone service.

29. Paid Island Signs & Advertising Company $2,000.00 for designing ads for our new Internet website.

29. Paid Atlantic Power and Light Company $8,432.00 for heat, power, and light. Allocate 25% of this amount to Electricity Expense and 75% to Factory Overhead.

31. Applied $2,000.00 of direct labor to Job No. 1404. (Time Ticket No. 266).

31. Applied $8,440.00 of direct labor to Job No. 1407. (Time Ticket No. 268).

Applied factory overhead using the appropriate rate. This job will not be completed unit March.

January 31. Applied $2,320.00 of direct labor to Job No. 1406. (Time Ticket No. 270).

Applied factory overhead using the appropriate rate. This job will not be completed until February.

31. Received the following data on the monthly payroll from the payroll clerk:

Direct labor (already recorded) .. $46,033.00

New payroll data (to be recorded):

Factory:

Indirect ————————————————————————–$22,440.00

SuperintendentAc€?cs salary —————————————————-$ 6,200.00

Nonfactory:

Sales Salaries ————————————————————— $ 23,950.00

OfficerAc€?cs Salaries ————————————————————- $14,280.00

Office Salaries —————————————————————– $12,620.25

Record the monthly payroll in the general journal. Remember that direct labor payroll already has been recorded as it was incurred in January. Salaries for indirect labor are recorded only at the end of the month. Debit Factory Overhead for Indirect Labor and SuperintendentAc€?cs salaries, debit other expense accounts for the appropriate amounts, credit FICA Tax Payable for 7.5% of gross pay, credit EmployeesAc€?c Income Tax Payable for 15% of gross pay, and credit Salaries Payable for the net pay.

Record the employer payroll taxes for January. All payroll taxes relating to factory personnel are debited to Factory Overhead; all payroll taxes related to nonfactory personnel are debited to Payroll Taxes ExpenseAc€??General. Use a simplified FICA tax rate of 7.5% of gross pay, a state unemployment tax rate of 5.4%, and a federal unemployment tax rate of 0.8%. Since this is the first month in the current year, no employee has reached the ceilings on the payroll taxes. Use the form on page 46 (optional) to determine the amounts for the journal entry.

31. Received a check form SaltWaterHut.com for the amount due after the discount period has expired.

31. Received a check from Fiji Stand-Up Paddle Board Co. for the amount due after the discount period has expired.

January 31. Paid all employees for wages earned in January.

31. Purchased $16,428.00 of direct materials on account form Light Hardware. Inc.

(Complete the Trial Balance column of the work sheet at this point.)

Adjusting Entries:

January 31. Insurance expired during January:

Factory (debit Factory Overhead) $2,628.00

Selling ———————————- 122.50

General ——————————– 537.60

31. Office supplies inventory as of January 31,                                   $3,300.00.

31. Depreciation for the month:

Factory equipment (debit Factory Overhead)                             $1,284.00

Office equipment —————————————–                         739.40

31. Amortation of patents for January (debit Factory Overhead)          $450.00

31. Property tax accrued for the month:

Factory (debit Factory Overhead)                                      $970.00

General                                                                    274.52

31. Close out underAc€??applied Factory Overhead of $2,741.38 to Cost of Goods Sold.

31. Based on past experience, Hydro Paddle Boards, Inc. estimates that $15,800.00 is a reasonable balance for the January 31 balance in the Allowance for Doubtful Accounts.

Income tax is based on 40% of income before tax. Accrue income tax owed by debiting Income Tax Payable for $13,573.75.

(Complete the work sheet and prepare financial statements at this point.)

Closing Entries:

January 31. Prepare closing entries to close 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.

 

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