Question

Required information Problem 03-1A Production cost flow and measurement; journal entries LO P1, P2, P3, P4 (The following information applies to the questions displayed below.) Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the Cutting process. The following information is available regarding its May inventories: Work in process inventory-Cutting Work in process inventory Stitching Finished goods inventory Beginning Ending Inventory Inventory 143,500 110,500 163,300 91,500 40,100 28,250 The following additional information describes the company's production activities for May. Direct materials Raw materials purchased on credit Direct materials used-Cutting Direct materials used-Stitching $ 75,000 24,250 0 Direct labor Direct labor-Cutting Direct labor-Stitching Total factory payroll paid (in cash) $ 20,600 82,400 160,000 Factory Overhead (Actual costs) Indirect materials used Indirect labor used Other overhead costs $ 39,600 57,000 57,000 Factory Overhead Rates Cutting (1508 of direct materials used) Stitching (1208 of direct labor used) Sales $656,000

Answer 1

Answer: JOURNAL ENTRIES

No.	Date	Account Title and Explanation	Debit $	Credit $
1	May 31	Raw Material invetory	75,000
		Account payable		75,000
		(Being RM inventory purchased on credit)
2	May 31	Work-in-progress (WIP) - Cutting	24,250
		Raw Material inventory		24,250
		(Being raw material applied to cutting process)
3	May 31	Factory Overhead	39,600
		Raw Material inventory		39,600
		(Being indirect material applied to overhead)
4	May 31	Work-in-progress (WIP) - Cutting	20,600
		Work-in-progress (WIP) - Stitching	82,400
		Factory Payroll payable		103,000
		(Being labor applied to production)
5	May 31	Factory Overhead	57,000
		Factory Payroll payable		57,000
		(Being factory payroll applied to overhead)
6	May 31	Factory Payaroll payable	160,000
		Cash		160,000
		(Being Factory payroll paid)
7	May 31	Factory overhead	57,000
		Other accounts		57,000
		(Being other overhead costs incurred )
8	May 31	Work-in-progress (WIP) -Cutting (24,250*150%)	36,375
		Work-in-progress (WIP) -Stitching (82,400*120%)	98,800
		Factory overhead		135,255
		(Being overhead applied to production)
9	May 31	Work-in-progress (WIP) -Stitching	114,225
		Work-in-progress (WIP) -Cutting (working 1)		114,225
		(Being partially completed goods transferred)
10	May 31	Finished Goods Inventory	367,225
		Work-in-progress (WIP) -Stitching (working 2)		367,225
		(Being finished goods transferred)
11	May 31	Cost of goods sold	379,075
		Finished Goods Inventory (working 3)		379,075
		(Being COGS booked for sales)
12	May 31	Accounts Receivable	656,000
		Sales revenue		656,000
		(Being sales booked)

Workings:- Ledger Accounts

1.) WORK-IN-PROGRESS - CUTTING  

Opening bal	143,500	WIP -Stitching	114,225
Raw material	24,250
Direct labor	20,600
Factory overhead	36,375	Closing bal.	110,500

2.) WORK-IN-PROGRESS - STITCHING  

Opening bal	163,300	Finished goods inventory	367,225
WIP- Cutting	114,225
Direct labor	82,400
Factory overhead	98,800	Closing bal.	91,500

3.) FINISHED GOODS INVENTORY

Opening bal	40,100	Cost of goods sold	379,075
WIP- Stitching	367,225	Closing bal.	28,250

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