Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October: a. Raw materials purchased on account, $209,000. b. Raw materials used in production, $191,000 ($152,800 direct materials and $38,200 indirect materials). C. Accrued direct labor cost of $48,000 and indirect labor cost of $20,000. d. Depreciation recorded on factory equipment, $105,000. e. Other manufacturing overhead costs accrued during October, $130,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $6 per machine-hour. A total of 76,000 machine-hours were used in October. g. Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Jobs that had cost $448,000 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 $36,000.

Answer 1

Required 1:

Transaction	General Journal	Debit	Credit
a)	Raw materials	$ 209,000
	Accounts payable		$ 209,000
	(To record Purchase of raw materials )
b)	Work in process	$ 152,800
	Manufacturing overhead	$ 38,200
	Raw Materials		$ 19,000
	(To record Raw materials used in production )
c)	Work in process	$ 48,000
	Manufacturing overhead	$ 20,000
	Salaries and wages payable(48,000+20,000)		$ 68,000
	( To record accrued salaries and wages )
d)	Manufacturing overhead	$ 105,000
	Accumulated Depreciation		$ 105,000
	(To record depreciation on factory equipment)
e)	Manufacturing overhead	$ 130,000
	Accounts payable		$ 130,000
	(To record Accrued other manufacturing overhead)
f)	Work in process (76,000*$ 6)	$ 456,000
	Manufacturing overhead		$ 456,000
	(to record manufacturing overhead cost applied to production )
g)	Finished goods	$ 511,000
	Work in process		$ 511,000
	(To record job cost is completed and transferred to finished goods)
h)1)	Cost of goods sold	$ 448,000
	Finished goods		$ 448,000
	(To record cost of goods sold )
h)2)	Accounts receivable (448,000 *124%)	$ 555,520
	Sales		$ 555,520
	(To record sales of goods at profit 24 % on cost )

Required 2:

Manufacturing Overhead					Work in process
b)	$ 38,200	$456,000	f)		Beg.Bal.	$ 36,000
c)	$ 20,000				b)	$ 152,800	$ 511,000	g)
d)	$ 105,000				c)	$ 48,000
e)	$ 130,000				f)	$ 456,000
End.Bal.		$ 162,800			End.Bal.	$ 181,800