Question

 Problem 02-5A Production transactions, subsidiary records, and source documents LO P1, P2, P3, P4

 Sager Company manufactures variations of its product, a technopress, in response to custom orders from its customers. On May 1, the company had no inventories of work in process or finished goods but held the following raw materials.

 On May 4, the company began working on two technopresses: Job 102 for Worldwide Company and Job 103 for Reuben Company.

 a. Purchased raw materials on credit and recorded the following information from receiving reports and invoices.

 Receiving Report No. 426, Material M, 270 units at $270 each.

 Receiving Report No. 427, Material R, 90 units at $270 each.

 Instructions: Record these purchases with a single journal entry. Enter the receiving report information on the materials ledger cards. 

b. Requisitioned the following raw materials for production.

 Requisition No. 35, for Job 102, 162 units of Material M.

 Requisition No. 36, for Job 102, 72 units of Material R.

 Requisition No. 37, for Job 103, 84 units of Material M.

 Requisition No. 38, for Job 103, 72 units of Material R.

 Requisition No. 39, for 19 units of paint.

 Instructions: Enter amounts for direct materials requisitions on the materials ledger cards and the job cost sheets. Enter the indirect materials amount on the materials ledger card.

 c. Received the following employee time tickets for work in May.

 Time tickets Nos. 1 to 10 for direct labor on Job 102, $89,000.

 Time tickets Nos. 11 to 30 for direct labor on Job 103, $53,000.

 Time tickets Nos. 31 to 36 for equipment repairs, $20,000.

 Instructions: Record direct labor from the time tickets on the job cost sheets.

 d. Paid cash for the following items during the month: factory payroll, $162,000, and miscellaneous overhead items, $126,000. Use the time tickets to record the total direct and indirect labor costs.

 e. Finished Job 102 and transferred it to the warehouse. The company assigns overhead to each job with a predetermined overhead rate equal to 80% of direct labor cost.

 Instructions: Enter the allocated overhead on the cost sheet for Job 102, fill in the cost summary section of the cost sheets.

 f. Delivered Job 102 and accepted the customer's promise to pay $440,000 within 30 days.

 g. Applied overhead cost to Job 103 based on the job's direct labor to date.

 Required:

 Complete the materials ledger cards for Material M, Material R, and paint using the information given in part a and b. Complete the job cost sheets for Jobs 102 and 103 using the information given in part a, b, c and e. Prepare journal entries for part a through g.

Answer 1

Complete Material Ledger cards as follows:

MATERIALS LEDGER CARD
Item	Material M
Received					Issued				Balance
Date	Receiving Report	Units	Unit price	Total Price	Requisition	Units	Unit price	Total Price	Units	Unit price	Total Price
May 01									300	270	81000
	#426	270	270	72900					570	270	153900
					#35	162	270	43740	408	270	110160
					#37	84	270	22680	324	270	87480
MATERIALS LEDGER CARD
Item	Material R
Received					Issued				Balance
Date	Receiving Report	Units	Unit price	Total Price	Requisition	Units	Unit price	Total Price	Units	Unit price	Total Price
May 01									95	270	25650
	#427	90	270	24300					185	270	49950
					#36	72	270	19440	113	270	30510
					#38	72	270	19440	41	270	11070
MATERIALS LEDGER CARD
Item	Paint
Received					Issued				Balance
Date	Receiving Report	Units	Unit price	Total Price	Requisition	Units	Unit price	Total Price	Units	Unit price	Total Price
May 01									95	120	11400
					#39	19	120	2280	76	120	9120

_______________________________________________________________________________________________

Prepare Job cost sheet as follows:

Customer's Name	Worldwide Company			Job No.	102
	Direct Materials	Direct Labor		Overhead cost Applied
Requisition Number	Amount	Time Ticket Number	Amount	Rate %	Amount
35	$43,740	1 to 10	$89,000	80%	$71,200
36	$19,440
Total	$63,180		$89,000		$71,200
Summary of Costs
Direct Material	$63,180
Direct Labor	$89,000
Overhead	$71,200
Total Cost of Job	223380
Customer's Name	Worldwide Company			Job No.	103
	Direct Materials	Direct Labor		Overhead cost Applied
Requisition Number	Amount	Time Ticket Number	Amount	Rate %	Amount
37	$22,680	1 to 10	$53,000	80%	$42,400
38	$19,440
Total	$42,120		$53,000		$42,400
Summary of Costs
Direct Material	$42,120
Direct Labor	$53,000
Overhead	$42,400
Total Cost of Job	137520

_______________________________________________________________________________________

Prepare General journal as follows:

General Journal	Debit	Credit
Raw Material Inventory	$97,200
Accounts payable ($72,900+$24,300)		$97,200
Factory payroll	$162,000
Cash		$162,000
Factory overhead	$126,000
Cash		$126,000
Finished goods Inventory	$223,380
Goods in Process		$223,380
Accounts receivable	$440,000
Sales		$440,000
COGS	$223,380
Finished goods inventory		$223,380