Question

Transactions: ISSUED COMMON STOCK WORTH S 5,00,.00 PURCHASED ON ACCOUNT 465,000 UNITS OF RAW MATERIALS AT 2. $25.00 EACH 3, TRANSFERRED 450,000 UNITS TO WORK-IN-PROCESS 4 INCURRED 300,000 LABOR HOURS AT s20.00 PER HOUR TO BE PAID LATER (Hint: wages payable) PLIED MANUFACTURING OVERHEAD FOR 300,000 HOURS COMPLETED 35000 UNITS WITH TOTAL LABOR ANID MANUFACTURING OVERHEAD CHARGED TO 35000 COMPLETED UNITS 6. 7 SOLD 34000 UNITS ON ACCOUNT & ACTUAL MANUFACTURING OVERHEAD INCURRED (Hint: Depreciation is not credited to cash) 380,000 180,000 220,000 155,000 145,000 ii. Utilities ii. Supplies iv. Taxes v. Insurance 9. PREPARE JOURNAL ENTRY FOR OVERAPPLIED/UNDERAPPLIED OVERHEAD IF ANY 10. SELLING EXPENSES INCURRED IS 100% OF TOTAL SALES-PAID IN CASH 11, OFFICE EXPENSES INCURRED Is i,000,00-PAID IN CASH REQUIRED 1. COMPLETE JOURNAL ENTRIES 2. POST JOURNAL ENTRIES TO THE LEDGER 3. PREPARE TRIAL BALANCE 4. PREPARE COST OF GOODS MANUFACTURED STATEMENT . PREPARE COST OF GOODS SOLD STATEMENT 6. PREPARE INCOME STATEMENT PREPARE STATEMENT OF RETAINED EARNINGS 8. PREPARE BALANCE SHEET 221 |Page

Answer 1

	JOURNAL ENTRIES:
1	Issued Common Stock Worth $5,000,000
	Cash/Bank A/c      Dr					5000000
	To, Common Stock						5000000
	(Being Common stock Issued)
	Explaination: Raising of Capital From outsiders
2	Purchase on Account 465,000 Units of Raw Material @ $ 25each
	Purchases (Raw Material Inventory) A/c   Dr					11625000
	To Bank A/c						11625000
	(Being 465000 units of Inventory Purchased @ $25 each)
3	Transferred 450,000 Units of Inventory to Work in Progress
	Work In Progress					11250000
	To Purchases (Raw Material Inventory) A/c						11250000
	Being 450000 Units of Raw Material transferred to WIP a/c)
4	Incurred 300,000 Labour Hours at $ 20 per hour to be paid later
	Wages A/c Dr					6000000
	To Wages Payable A/c						6000000
	(Being Wages payable for 300000 Hours at $ 20/ Hour)
5	Manufacturing OH Incurred
	Depreciation A/c    Dr					380000
	To Fixed Assets/ PPE A/c						380000
	(Being Depreciation on PPE Charged for the period…)
	Utilities A/c Dr					180000
	Supplies A/c Dr					220000
	Taxes A/c Dr					155000
	Insurance A/c Dr					145000
	To Bank/ Cash A/c						700000
	( Being Expenses incurred towards Utliities)
	For Easiness, lets pass an journal entry of all expenses to Manufacturing OH
6	Manufacturing OH					1080000
	To Depreciation A/c						380000
	To Utilities A/c						180000
	To Supplies A/c						220000
	To Taxes A/c						155000
	To Insurance A/c						145000
	(Being Expenses charged to Manufacturing OH)
	Assumed that all above costs are relating to manufacturing
>>>>	Now that we know that 300000 Hours of Labour OH, Manufacturing OH is required (applied) for 35000 Units				(1080000/300000)
	For your Understanding: Machine Hour Rate is
	Manufacturing OH Incurred						1080000
	Manufacturing OH per Labour Hour						3.6
	Lets Understand Finished Goods
	For 1 Units of Finished goods: WIP units (transferred from Raw Material, Labour Hours incurred& Manufacturing OH incurred to convert to finished Product
	Which includes: WIP Units (Transferred from Raw Material), Labour OH and Manufacturing OH (WIP Process)
	For 35000 Units of Finished goods: 35000 of WIP units, Labour Hours, Manufacturing OH
7	Finished Goods- Inventory					7955000
	To WIP						875000
	To Wages A/c						6000000
	To						1080000
	(Being Cost Incurred to produce 35000 units of Finished Goods)
8	Cost of Goods Sold
	Since only 34000 units are sold out of 35000 Units, Proportionate FG to be Transferred
	Cost of Goods Sold A/c Dr					7727714
	To Finished Goods A/c						7727714
	( Being Inventory Expenses to the extent of 34000 Units recognised as per GAAP on account of Sales)
9	Office Expenses incurred $100000 in cash
	Office Expenses A/c Dr					1000000
	To Cash/Bank A/c						1000000
	(Being Office Expenses Incurred)
10	Since Sales Amount is not stated I am passing entry for Selling expenses
	Selling Expenses A/c Dr					xxxxxxx
	To Cash/Bank A/c						xxxxxxx
	Being Selling Expenses incurred at 10% of Sales