Question

Re-Tire produces bagged mulch made from recycled tires. Production involves shredding tires and packaging the pieces for sale in the bagging department. All direct materials enter in the first process. The following describes production operations for October Direct materials used Direct labor used 30% in Shredding; 70% in Bagging. Predetermined overhead rate (based on direct labor) Transferred to Bagging Transferred to finished goods $234,000 $121,000 165% S205,500 $590,000 The company's revenue for the month totaled $470,000 from credit sales, and its cost of goods sold for the month is $254,000. Prepare summary journal entries dated October 31 to record its October production activities for (1) direct materials usage, (2) direct labor incurred (3) overhead applied, (4) goods transfer from Shredding to Bagging, (5) goods transfer from Bagging to finished goods, (6) credit sales, and (7) cost of goods sold

Answer 1

Solution: Transaction Account title Debit Credit 1 Work in process inventory-Shredding 234000 Raw material inventory 234000 2 Work in process inventory-Shredding Work in process inventory-Bagging Factory labor 36300 84700 121000 3 Work in process inventory-Shredding | 59895 Factory overhead (36300 165%) 59895 4 Work in process inventory-Bagging Work in process inventory-Shredding 205500 205500 5 Finished goods Work in process inventory-Bagging 590000 590000 6 Account receivable sales revenue 470000 470000 254000 Cost of goods sold Inventory 254000