Question

Journal Entries, T-Accounts, Cost of Goods Manufactured and Sold

During May, the following transactions were completed and reported by Jerico Company:

1. Materials purchased on account, $60,100.
2. Materials issued to production to fill job-order requisitions: direct materials, $50,000; indirect materials, $8,800.
3. Payroll for the month: direct labor, $75,000; indirect labor, $36,000; administrative, $28,000; sales, $19,000.
4. Depreciation on factory plant and equipment, $10,400.
5. Property taxes on the factory accrued during the month, $1,450.
6. Insurance on the factory expired with a credit to the prepaid insurance account, $6,200.
7. Factory utilities, $5,500.
8. Advertising paid with cash, $7,900.
9. Depreciation on office equipment, $800; on sales vehicles, $1,650.
10. Legal fees incurred but not yet paid for preparation of lease agreements, $750.
11. Overhead is charged to production at a rate of $18 per direct labor hour. Records show 4,000 direct labor hours were worked during the month.
12. Cost of jobs completed during the month, $160,000.

The company also reported the following beginning balances in its inventory accounts:

Materials Inventory	$7,500
Work-in-Process Inventory	37,000
Finished Goods Inventory	50,000

Required:

1. Prepare journal entries to record the transactions occurring in May. For a compound transaction, if an amount box does not require an entry, leave it blank.

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.

2. Prepare T-accounts for Materials Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post the entries to the T-account in the same order in which they were journalized.

Materials Inventory
Balance
Balance

Work in Process Inventory
Balance

Finished Goods Inventory
Balance

Overhead Control
		Balance

3. Prepare a statement of cost of goods manufactured.

Jerico Company
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 20XX
		$
Overhead:
	$
	$
Manufacturing costs added		$
Cost of goods manufactured		$

4. If the overhead variance is all allocated to cost of goods sold, by how much will cost of goods sold decrease or increase?
(Decreases or Increase) by   $

Part 1 Options:

• Cash
• Finished Goods
• Legal Fees Payable
• Materials
• Overhead Control
• Accounts Payable
• Accumulated Depreciation
• Administrative Expense
• Cash
• Finished Goods
• Property Taxes Payable
• Selling Expense
• Utilities Payable
• Wages Payable
• Work in Process
• Materials
• Overhead Control
• Prepaid Insurance
• Property Taxes Payable
• Selling Expense
• Materials
• Overhead Control
• Prepaid Insurance
• Property Taxes Payable
• Selling Expense
• Accumulated Depreciation
• Administrative Expense
• Cash
• Finished Goods
• Materials

Answer 1

1	Ref.	Account titles and explanation					Debit	Credit
	a.	Materials inventory					60100
		Accounts payable						60100
		(Materials purchased on account)
	b.	Work in process inventory					50000
		Overhead control					8800
		Materials inventory						58800
		(Materials issued to production)
	c.	Work in process inventory					75000
		Overhead control					36000
		Salaries and wages expense			(28000+19000)		47000
		Salaries and wages payable						158000
		(Payroll recorded)
	d.	Overhead control					10400
		Accumulated depreciation- Factory plant & equipment						10400
		(Depreciation recorded)
	e.	Overhead control					1450
		Property taxes payable						1450
		(Property taxes due)
	f.	Overhead control					6200
		Prepaid insurance						6200
		(Prepaid insurance expired)
	g.	Overhead control					5500
		Utilities payable						5500
		(Factory utilities incurred)
	h.	Selling expense					7900
		Cash						7900
		(Advertising expense paid)
	i.	Depreciation expense				(800+1650)	2450
		Accumulated depreciation- Office equipment						800
		Accumulated depreciation- Vehicles						1650
		(Depreciation recorded)
	j.	Administrative expense					750
		Legal fees payable						750
		(Legal fees accrued)
	k.	Work in process inventory				(4000*18)	72000
		Overhead control						72000
		(Overhead charged to production)
	l.	Finished goods inventory					160000
		Work in process inventory						160000
		(Cost of jobs completed)
2			Materials inventory
	Particulars			Debit	Particulars			Credit
	Beg. Bal.			7500	b.			58800
	a.			60100
				67600				58800
	End. Bal.			8800
			Overhead control
	Particulars			Debit	Particulars			Credit
	b.			8800	k.			72000
	c.			36000
	d.			10400
	e.			1450
	f.			6200
	g.			5500
				68350				72000
					End. Bal.			3650
			Work in process inventory
	Particulars			Debit	Particulars			Credit
	Beg. Bal.			37000	l.			160000
	b.			50000
	c.			75000
	k.			72000
				234000				160000
	End. Bal.			74000
			Finished goods inventory
	Particulars			Debit	Particulars			Credit
	Beg. Bal.			50000
	l.			160000
				210000				0
	End. Bal.			210000