Question

Exercise 3-5 Journal Entries and T-accounts [LO3-1, LO3-2]

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $210,000.
2. Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).
3. Accrued direct labor cost of $49,000 and indirect labor cost of $22,000.
4. Depreciation recorded on factory equipment, $106,000.
5. Other manufacturing overhead costs accrued during October, $130,000.
6. 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.
7. Jobs costing $513,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $452,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 24% 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 $33,000.

Answer 1

Q1

Date	General Journal	Debit	Credit
a	Raw Materials inventory	210000
	Accounts payable		210000
b	Work In process inventory	152000
	Manufacturing overhead	38000
	Raw Materials inventory		190000
c	Work in process	49000
	Manufacturing overhead	22000
	Salaries & wages payable		71000
d	Manufacturing overhead	106000
	Accumulated depreciation		106000
e	Manufacturing overhead	130000
	Accounts payable		130000
f	Work In process	764000
	Manufacturing overhead		764000
	(76400)*$10.00
g	Finished goods inventory	513000
	Work In process		513000
h	Accounts receivable	560480
	sales		560480
	(452000*124%)
	Cost of goods sold	452000
	finished goods inventory		452000

Q2

Manufacturing overhead
b	38000	f	764000
c	22000
d	106000
e	130000
end bal	468000
Work in process
Beginning balance	33000	g	513000
b	152000
c	49000
f	764000
end bal	485000