Dave Ryan Is the Owner and Operator of Ryan's Arcade

question 51

Essay

Dave Ryan is the owner and operator of Ryan's Arcade. At the end of its accounting period, December 31, Ryan's Arcade has assets of $450,000 and liabilities of $125,000. Using the accounting equation, determine the following amounts:
(a)owner's equity as of December 31 of the current year
(b)owner's equity as of December 31 at the end of the next year, assuming that assets increased by $65,000 and liabilities increased by $35,000 during the year

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Definitions:

Overapplied Manufacturing Overhead

A scenario where the allocated manufacturing overhead costs exceed the actual overhead costs incurred, resulting in a credit balance.

Predetermined Overhead Rate

This is a rate used to allocate manufacturing overhead costs to individual units of production, based on a certain activity, such as labor hours or machine hours.

Direct Materials

Substances that can be directly linked to the manufacturing of a particular item.

Direct Labor

Labor costs that can be easily traced to individual units of product; essentially the wages paid to workers who directly manufacture goods.