For Each of the Following Situations, Record the Journal Entries

question 27

Essay

For each of the following situations, record the journal entries required.
On February 1, 2014, Alloy Company purchased $5,000 of merchandise from Alysou Company on account, terms 2/15, n/30, FOB shipping point. The goods cost Alysou $2,900. Alysou uses the perpetual inventory method.
On March 1, Alysou purchased a patent for $6,000. The patent was registered with the Canadian Intellectual Property Office 8 years ago. Alysou estimated that it would keep the patent for 8 years. Amortization is recorded on December 31.
On April 23, Lauren paid $4,650 to Alysou Company to fulfill her promissory note agreement. Of the $4,650, $650 is interest.
A year end physical count is performed for Alysou Company and it is determined that $25,240 worth of inventory is on hand on December 31. The balance sheet has a value of $26,700 as the inventory balance.

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Definitions:

Variable Overhead Rate

The rate at which variable overhead costs are allocated to production, based on a predetermined base such as direct labor hours or machine hours.

Direct Labor-Hours

The total hours worked by employees directly involved in the production process.

Fixed Manufacturing Overhead

The static expenses related to the production process that do not vary with the level of output, such as salaries and rental costs of facilities.

Budgeted Production

The quantity of products or services that a company plans to produce during a specific period, based on forecasts.