The Income Statement for Pierre Paul Company for the Year

question 12

Essay

The income statement for Pierre Paul Company for the year ended December 31 2016 is as follows: $\begin{array}{c} \text {PIERRE PAUL COMPANY}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2016}\\\begin{array}{lrr} \text {Revenues } &\\ \text { Sales revenue } &\$53,000\\ \text { Interest revenue } &4,000\\ \text { Total revenues } &\$57,000\\\\ \text { Expenses } &\\ \text { Cost of goods sold} &30,000\\ \text { Salaries and wages expense } &18,000\\ \text {Interest expense } &1,500\\ \text { Total expenses } &&49,500\\\\ \text { Net income. } &&\$7,500\\\end{array}\end{array}$
Prepare the entries to close the revenue and expense accounts at December 31 2016. You may omit explanations for the transactions.

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Definitions:

Manufacturing Overhead

All manufacturing costs that are not directly related to the production of goods or services, such as factory rent, utilities, and equipment maintenance.

Predetermined Overhead Rate

A rate calculated before a cost period begins, used to allocate overhead costs to products based on a chosen activity base.

Direct Labor-hour

A measure of the work time spent by employees who are directly involved in the manufacturing process of a product.

Predetermined Overhead Rate

An estimated rate used to assign overhead costs to products or job orders, based on a pre-established formula or basis.