Accountancy & Auditing, Paper I

Bella Beauty Salon's unadjusted trial balance for the current year follows: Bella Beauty Salon Trial Balance December 31 Debit Credit Cash $4,200 Prepaid insurance 1,480 Shop supplies 990 Shop equipment 3,860 Accumulated depreciation shop equipment$ 770 Building 57,500 Accumulated depreciation–building 3,840 Land 55,000 Unearned rent 1,600 Long-term notes payable 50,000 Bella Hanson, Capital 49,860 Rent earned 2,400 Fees earned 23,400 Wages expense 3,200 Utilities expense 690 Property taxes expense 600 Interest expense 4,350 Totals $131,870$131,870 Additional information:

The following financial data were taken from the annual financial statements of Smith Corporation: Details 2007 2008 2009 Current assets $450,000$ 400,000 $ 500,000 Current liabilities 390,000 300,000 340,000 Sales 1,450,000 1,500,000 1,400,000 Cost of goods sold 1,180,000 1,020,000 1,120,000 Inventory 280,000 200,000 250,000 Accounts receivable 120,000 110,000 105,000 Required:

Valenko Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $215,000 Purchases of raw materials$260,000 Direct labor ? Administrative expenses $160,000 Manufacturing overhead applied to work in process$340,000 Total actual manufacturing overhead costs $350,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials$50,000 $40,000 Work in process ?$33,000 Finished goods $30,000 ? The total manufacturing costs for the year were 675 , 000 ; t h e c o s t o f g o o d s a v a i l a b l e f o r s a l e t o t a l 675,000; the cost of goods available for sale total 675 , 000 ; t h ecos t o f g oo d s a v ai l ab l e f or s a l e t o t a l 720,000; the unadjusted cost of goods sold total 665 , 000 ; a n d t h e n e t o p e r a t i n g i n c o m e w a s 665,000; and the net operating income was 665 , 000 ; an d t h e n e t o p er a t in g in co m e w a s 35,000. The company's over-applied or under-applied overhead is closed entirely to cost of goods sold. Required: