Which of the following actions are specifically prohibited by the ...

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Which of the following actions are specifically prohibited by the Fair Credit Reporting Act?
 
  A) using credit information obtained from a customer as evidence during a trial without obtaining his prior consent
  B) asking someone to get another person's customer information using false, fictitious, or fraudulent statements or using forged, counterfeit, lost, or stolen documents
  C) using a court subpoena to forcibly obtain customer information from a financial institution or directly from a customer of a financial institution
  D) asking someone personally known to a customer to convince the customer to provide his or her credit information

Question 2

Overview of general ledger relationships.
 
  Brandon Company uses normal costing in its job-costing system. The company produces custom bikes for toddlers. The beginning balances (December 1) and ending balances (as of December 30) in their inventory accounts are as follows:
 
   Beginning Balance 12/1 Ending Balance 12/31
  Materials Control 2,100  8,500
  Work-in-Process Control 6,700 9,000
  Manufacturing Department Overhead Control  94,000
  Finished Goods Control 4,400 19,400
 
  Additional information follows:
  a. Direct materials purchased during December were 66,300.
  b. Cost of goods manufactured for December was 234,000.
  c. No direct materials were returned to suppliers.
  d. No units were started or completed on December 31 and no direct materials were requisitioned on December 31.
  e. The manufacturing labor costs for the December 31 working day: direct manufacturing labor, 4,300, and indirect manufacturing labor, 1,400.
  f. Manufacturing overhead has been allocated at 110 of direct manufacturing labor costs through December 31.
 
  Required:
  1. Prepare journal entries for the December 31 payroll.
  2. Use T-accounts to compute the following:
  a. The total amount of materials requisitioned into work in process during December
  b. The total amount of direct manufacturing labor recorded in work in process during December (Hint: You have to solve requirements 2b and 2c simultaneously)
  c. The total amount of manufacturing overhead recorded in work in process during December
  d. Ending balance in work in process, December 31
  e. Cost of goods sold for December before adjustments for under- or overallocated manufacturing overhead
  3. Prepare closing journal entries related to manufacturing overhead. Assume that all under- or overallocated manufacturing overhead is closed directly to Cost of Goods Sold.

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Answer to Question 1

B
Explanation: B) Under the Fair Credit Reporting Act, consent is required to obtain credit information on individuals. Specifically, this law prohibits the following actions:
 Using false, fictitious, or fraudulent statements or documents to get customer information from a financial institution or directly from a customer of a financial institution.
 Using forged, counterfeit, lost, or stolen documents to get customer information from a financial institution or directly from a customer of a financial institution.
 Asking someone to get another person's customer information using false, fictitious, or fraudulent statements or using forged, counterfeit, lost, or stolen documents.

Answer to Question 2

Note: In some print versions of the text, the second column heading appears as Ending Balance 12/31. The second column heading in the problem should be Ending Balance 12/30 and not Ending Balance 12/31.

1. Adjusting entry for 12/31 payroll.
(a) Work-in-Process Control 4,300
Manufacturing Department Overhead Control 1,400
Wages Payable Control 5,700
To recognize payroll costs

(b) Work-in-Process Control 4,730
Manufacturing Overhead Allocated 4,730
To allocate manufacturing overhead at 110
4,300 = 4,730 on 4,300 of direct manufacturing
labor incurred on 12/31

Note: Students tend to forget entry (b) entirely. Stress that a budgeted overhead allocation rate is used consistently throughout the year. This point is a major feature of this problem.

2. a-e An effective approach to this problem is to draw T-accounts and insert all the known figures. Then, working with T-account relationships, solve for the unknown figures. Entries (a) and (b) are posted into the T-accounts that follow.

Materials Control
Beginning balance 12/1
Purchases 2,100
66,300 59,900a Materials requisitioned
Balance 12/30 8,500
a 2,100 + 66,300  8,500 = 59,900

(a) Direct materials requisitioned into work in process during December equals 59,900 because no materials are requisitioned on December 31.
Work-in-Process Control
Beginning balance 12/1
Direct materials 59,900
Direct manf. labor 84,000b
Manf. overhead
allocated 92,400b 6,700

236,300 234,000 Cost of goods manufactured
Balance 12/30 9,000
(a) Direct manuf. labor 12/31 payroll 4,300
(b) Manuf. overhead allocated 12/31 4,730c
Ending balance 12/31 18,030
b Direct manufacturing labor and manufacturing overhead allocated are unknown. Let x = Direct manufacturing labor up to 12/30 payroll, then manufacturing overhead allocated up to 12/30 payroll = 1.10x

Use the T-account equation and solve for x:
6,700 + 59,900 + x + 1.10x  234,000 = 9,000
2.10x = 9,000  6,700  59,900 + 234,000 = 176,400
x =
Direct manufacturing labor up to 12/30 payroll = 84,000
Manufacturing overhead allocated up to 12/30 = 1.10  84,000 = 92,400
Total direct manufacturing labor for December = 84,000 + 4,300 (direct manufacturing labor for 12/31 calculated in requirement 1) = 88,300
Total manufacturing overhead allocated for December = 92,400 + 4,730c = 97,130

c 4,300  110 = 4,730, manufacturing overhead allocated on 4,300 of direct manufacturing labor incurred on 12/31.

(b) Total direct manufacturing labor for December = 88,300.
(c) Total manufacturing overhead allocated (recorded) in work in process equals 97,130.
(d) Ending balance in work-in-process inventory on December 31 equals 9,000 + 4,300 (direct manufacturing labor added on 12/31, requirement 1) + 4,730 (manufacturing overhead allocated on 12/31, requirement 1) = 18,030.

An alternative approach to solving requirements 2b, 2c, and 2d is to calculate the work-in-process inventory on December 31, recognizing that because no new units were started or completed, no direct materials were added and the direct manufacturing labor and manufacturing overhead allocated on December 31 were added to the work-in-process inventory balance of December 30.

Work-in-process
inventory
on 12/31 = Work-in-process
inventory on 12/30 + Direct manufacturing labor incurred on 12/31 + Manufacturing overhead allocated on 12/31
= 9,000 + 4,300 + 4,730
= 18,030

We can now use the T-account equation for work-in-process inventory account from 12/1 to 12/31, as follows.

Let x = Direct manufacturing labor for December
Then 1.10x = Manufacturing overhead allocated for December

Work-in-process
inventory
on 12/1 + Direct
materials
added in December + Direct manufacturing labor added in December + Manufacturing overhead allocated in December  Cost of goods manufactured in December = Work-in-process inventory on 12/31
6,700 + 59,900 + x + 1.10x  234,000 = 18,030
2.10x = 18,030  6,700  59,900 + 234,000
2.10x = 185,430
x =

Total direct manufacturing labor for December = 88,300
Total manufacturing overhead allocated in December = 1.10  88,300 = 97,130

Finished Goods Control
Beginning balance 12/1
Cost of goods manufactured 4,400
234,000 219,000c Cost of goods sold
Balance 12/31 19,400
c 4,400 + 234,000  19,400 = 219,000

(e) Cost of goods sold for December before adjustments for under- or overallocated overhead equals 219,000:

Cost of Goods Sold
Cost of goods sold 219,000 1,730 (c) Closing entry

Manufacturing Department Overhead Control
Balance through 12/30
(a) Indirect manufacturing labor 12/31 94,000

1,400 95,400 (c) Closing entry

Manufacturing Overhead Allocated
(c) Closing entry 97,130 92,400
4,730 Balance through 12/30
(b) Manufacturing overhead allocated, 12/31

Wages Payable Control
1,400 (a) 12/31 payroll

3. Closing entries:

(c) Manufacturing Overhead Allocated 97,130
Manufacturing Department Overhead Control 95,400
Cost of Goods Sold 1,730
To close manufacturing overhead accounts and overallocated overhead to cost of goods sold