Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October a. Raw materials purchased on account. $210,000. b. Raw materials used in production, $190,000 ($178,000 direct materials and $12.000 indirect materials). C. Accrued direct labor cost of $90,000 and indirect labor cost of $110.000. d. Depreciation recorded on factory equipment. $40,000. e. Other manufacturing overhead costs accrued during October, $70,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $8 per machine-hour. A total of 30,000 machine-hours were used in October g. Jobs costing $520,000 according to their job cost sheets were completed during October and transferred to Finished Goods h. Jobs that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 25% above cost. Required: 1. Prepare journal entries to record the transactions given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $42.000,

Answer 1

Solution 1-1:

Journal Enteries - Polaris Company
S. No	General Journal	Debit	Credit
a	Raw Material Inventory Dr	$210,000.00
	To Accounts Payable		$210,000.00
	(Raw material purchased on account)
b	Work In Process Dr	$178,000.00
	Manufacturing Overhead Dr	$12,000.00
	To Raw Material Inventory		$190,000.00
	(Being Raw material used in production)
c	Work In Process Dr	$90,000.00
	Manufacturing Overhead Dr	$110,000.00
	To Wages Payable		$200,000.00
	(Being labor cost accrued)
d	Manufacturing overhead Dr	$40,000.00
	To Accumulated depreciation - Factory Equipment		$40,000.00
	(Being depreciation charged on factory equipment)
e	Manufacturing overhead Dr	$70,000.00
	To Accounts Payable		$70,000.00
	(Being other manufacturing overhead cost incurred)
f	Work In Process Dr (30000 * $8)	$240,000.00
	To Manufacturing overhead		$240,000.00
	(Being manufacturing overhead applied to prodcution)
g	Finished Goods Inventory Dr	$520,000.00
	To Work In Process		$520,000.00
	(Being cost of completed goods transferred to finished goods)
h-1	Cost of goods sold Dr	$480,000.00
	To Finished Goods Inventory		$480,000.00
	(Being cost of unit sold transferred to COGS)
h-2	Accounts Receivables Dr ($480,000*125%)	$600,000.00
	To Sales Revenue		$600,000.00
	(To record sales on account)

Solution 1-2:

Manufacturing Overhead Account
Particulars	Debit	Particulars	Credit
To Raw material inventory	$12,000.00	By Work In Process	$240,000.00
To Wages Payable	$110,000.00
To Accumulated depreciation - Factory Equipment	$40,000.00
To Accounts Payable	$70,000.00
To Ending balance	$8,000.00
Total	$240,000.00	Total	$240,000.00

Work in Process Account
Particulars	Debit	Particulars	Credit
To Beginning Balance	$42,000.00	By Finished goods inventory	$520,000.00
To Raw Material Inventory	$178,000.00	By Ending balance	$30,000.00
To Wages Payable	$90,000.00
To Manufacturing overhead applied	$240,000.00
Total	$550,000.00	Total	$550,000.00

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