Question

The following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year. Manufacturing Overhead Work in Process Finished Goods 479,232 b) 399,360 Bal 13.640 (e) 742,000 Bal. 42,000(d) 656,000 79,872 288.000 le) 742.000 89,000 Bal. 128,000 399,360 49,000 Cost of Goods Sold (d) 656,000 Bal. The overhead that had been applied to production during the year is distributed among Work in Process, Finished Goods, and Cost of Goods Sold as of the end of the year as follows: $ 23,040 Work in Process, ending Finished Goods, ending Cost of Goods Sold Overhead applied 314,880 $ 399,360 For example, of the $48,000 ending balance in work in process, $23,040 was overhead that had been applied during the year. Required: 1. Identity reasons for entries (a) through (d). 2. Assume that the underapplied or overapplied overhead is closed to Cost of Goods Sold. Prepare the necessary journal entry. 3. Assume that the underapplied or overapplied overhead is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the necessary journal entry 11: Next >

Answer 1

1	Entry	Reason
	(a)	Manufacturing overhead incurred
	(b)	Manufacturing overhead applied
	(c )	Cost of goods completed and transferred to finished goods
	(d)	Cost of goods sold recorded
2	Manufacturing overhead incurred=$ 479232
	Manufacturing overhead applied=$ 399360
	Manufacturing overhead applied < Manufacturing overhead incurred
	Hence,overhead is underapplied.
	Underapplied overhead=479232-399360=$ 79872
	Journal entry:
					Debit	Credit
	Cost of goods sold				79872
	Manufacturing overhead					79872
3	Underapplied overhead is applied to WIP,FG and COGS in the ratios of overhead applied
	(at 23040:61440:314880 or 3:8:41)
	Journal entry:
					Debit	Credit
	Work in process		79872*(3/52)		4608
	Finished goods		79872*(8/52)		12288
	Cost of goods sold		79872*(41/52)		62976
	Manufacturing overhead					79872