Reference no: EM132762910

Haggle Corporation is a manufacturer that uses job order costing. On January 1, the company's inventory balances were as follows:

The company applies overhead cost to jobs on the basis of machine hours worked. For the current year, the company's predetermined overhead rate was based on a cost formula that estimated P 450,000 of total manufacturing overhead for an estimated activity level of 75,000 machine hours. The following transactions were recorded for the year.

a. Raw materials were purchased on account, P 410,000.
b. Raw materials were used in production, P 38,000 (P 36,000 direct materials and P 20,000 indirect materials)
c. The following costs were accrued for employee services: direct labor, P 75,000; indirect labor, P 110,000; sales commission, P 90,000; and administrative salaries, P 200,000.
d. Sales travel costs (on account) were P 17,000.
e. Utility cost (on account) in the factory were P 180,000.
f. Advertising costs (on account) were P 180,000.
g. Depreciation was recorded for the year, P 530,000 (80% relates to factory assets, and 20% relates to selling and administrative assets.
h. Insurance expired during the year, P 10,000 (70% relates to factory operations, and the remaining 30% relates to selling and administrative activities.
I. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, the company worked 80,000 machine hours on all jobs during the year.
j. Job costing P 900,000 to manufacture according to their job cost sheets were completed during the year.
k. Jobs were sold on account to customers during the year for a total of P 1,500,000. The job cost P 870,000 to manufacture according to their job cost sheets.

Required:

Problem 1. Prepare journal entries to record the preceding transactions.

Problem 2. Post the entries in (1) above to T-accounts (don't forget to enter the beginning balances in the inventory accounts.

Problem 3. Is manufacturing overhead underapplied or overapplied for the year? Prepare journal entry to close any balance in the manufacturing overhead account to COGS. Do not allocate the balance the work in process, finished goods, and cost of goods sold.

Problem 4. Prepare income statement for the year.