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Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows.

1. Purchased raw materials on credit, $240,000.
2. Materials requisitions record use of the following materials for the month.

Job 136	$	50,000
Job 137		32,500
Job 138		19,600
Job 139		22,600
Job 140		7,000
Total direct materials		131,700
Indirect materials		20,000
Total materials used	$	151,700

3. Paid $15,500 cash to a computer consultant to reprogram factory equipment.
4. Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$	12,200
Job 137		10,600
Job 138		37,700
Job 139		39,000
Job 140		3,600
Total direct labor		103,100
Indirect labor		24,000
Total	$	127,100

5. Applied overhead to Jobs 136, 138, and 139.
6. Transferred Jobs 136, 138, and 139 to Finished Goods.
7. Sold Jobs 136 and 138 on credit at a total price of $545,000.
8. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Depreciation of factory building	$	68,500
Depreciation of factory equipment		37,500
Expired factory insurance		11,000
Accrued property taxes payable		37,000

9. Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

2. Prepare journal entries to record the events and transactions a through i.

Answer 1

No.	Transaction.	Account titles and explanation	Debit	Credit
1.	a.	Raw materials inventory	$240000
		Accounts payable		$240000
		(To record raw materials purchased on credit)
2.	b.	Work in process inventory	$131700
		Factory overhead	$20000
		Raw materials inventory		$151700
		(To record
3.	c.	Factory equipment	$15500
		Cash		$15500
		(To record factory equipment purchased)
4.	d.	Work in process inventory	$103100
		Factory overhead	$24000
		Cash		$127100
		(To record wages paid in cash)
5.	e.	Work in process inventory ($12200+37700+39000)*200%	$177800
		Factory overhead		$177800
		(To record applied overhead to Jobs 136, 138, and 139)
6.	f.	Finished goods inventory	$358900
		Work in process inventory		$358900
		(To record jobs transferred to finished goods)
7.	g.	Accounts receivable	$545000
		Sales revenue		$545000
		(To record jobs sold on credit)
		Cost of goods sold	$219300
		Finished goods inventory		$219300
		(To record cost of goods sold)
8.	h.	Factory overhead	$154000
		Accumulated depreciation- Factory building		$68500
		Accumulated depreciation- Factory equipment		$37500
		Prepaid insurance		$11000
		Property tax payable		$37000
		(To record overhead costs incurred)
9.	i.	Work in process inventory ($10600+3600)*200%	$28400
		Factory overhead		$28400
		(To record applied overhead to Jobs 137 and 140)

Calculation of Finished goods inventory

Finished goods inventory= Job 136+Job 138+Job 139

= $86600+132700+139600= $358900

Job 136= Direct materials+Direct labor+Factory overhead

Job 136= $50000+12200+(12200*200%)= $86600

Job 138= $19600+37700+(37700*200%)= $132700

Job 139= $22600+39000+(39000*200%)= $139600

Cost of goods sold= Job 136+Job 138

= $86600+132700= $219300

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