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, $189,000 ($151,200 direct materials and $37,800 indirect materials). C. Accrued direct labor cost of $50,000 and indirect labor cost of $21,000. d. Depreciation recorded on factory equipment, $106,000. e. Other manufacturing overhead costs accrued during October, $130,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $10 per machine-hour. A total of 76,400 machine-hours were used in October. g. Jobs costing $512,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Jobs that had cost $449,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 30% 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 $35,000.

Answer 1

1) Journal entry

No	General Journal	Debit	Credit
a	Raw material	210000
	Account payable		210000
b	Work in process	151200
	Manufacturing overhead	37800
	Raw material		189000
c	Work in process	50000
	Manufacturing overhead	21000
	wages payable		71000
d	Manufacturing overhead	106000
	Accumulated depreciation-equipment		106000
e	Manufacturing overhead	130000
	Account payable		130000
e	Work in process	764000
	Manufacturing overhead		764000
f	Finished goods	512000
	work in process		512000
g	Account receivable (449000*1.30)	583700
	Sales revenue		583700
	(To record sales)
	Cost of goods sold	449000
	Finished goods		449000
	(To record cost of goods sold)

b) T account

Manufacturing overhead					Work in process
Raw material	37800	Work in process	764000		Beg Bal	35000	Finished goods	512000
wages payable	21000				Raw material	151200
Accumulated depreciation	106000				wages payable	50000
Account payable	130000				Manufacturing overhead	764000
		Balance	469200		Balance	488200