Question

Problem 1 (Flow of an accounting for the manufacturing company) The following events took place at the Barton Manufacturing Corporation for the current year: 1. 2. Purchased P80,000 in direct materials. Inçurred labor costs as follows: a. Direct labor, P42,000. turing overhead) 3. Purchased manufacturing equipment for P67,200. 4. Other manufacturing overhead was P80,500, excluding supervisory labor. Transferred 70 percent of the materials purchased to work in process. 6. 5. Completed work on 60 percent of the goods in process. Costs are assigned equally across all work in process. 7. Sold 90 percent of the completed goods. There were no beginning balances in the inventory accounts. All costs incurred were debited to the appropriate account and credited to accounts payable. Required. 1. Prepare journal entries to reflect these events. 2. Prepare T-accounts to show these events. 3. Prepare a cost of goods sold statement from the data.

Answer 1

1) Journal Entries:
Date	Accounts Title	Debit (P)	Credit (P)
1	Direct material	80000
	Accounts Payable		80000
	(being purchase of direct materials)
2	Work in Progress	42000
	Manufacturing Overhead	11500
	Wages payable		53500
	(being labor made payable)
3	Manufacturing Overhead	67200
	Accounts Payable		67200
	(being manufacturing equipment purchased)
4	Manufacturing Overhead	80500
	Accounts Payable		80500
	(being other manufacturing overhead incurred)
5	Work in Progress	56000
	Direct material		56000
	(being 70% of DM transferred to WIP)
5.1	Work in Progress	159200
	Manufacturing Overhead		159200
	(Being all Manufacturing overhead transferred to
	WIP A/C)
6	Finished Goods	154320
	Work in Progress		154320
	Goods finished=(42000+56000+159200)*60%=154320
7	COGS	138888
	Finished Goods		138888
	(Being 90% of the finished goods sold)
2) T-Accounts:
Direct Material A/c
Debit	Amount	Credit	Amount
AP	80000	WIP	56000
		CB	24000
Manufacturing Overhead A/c
Sup.labor	11500	WIP	159200
Manu. Eq.	67200
Other exp	80500
Work in Progress A/c
DM	56000	FG Inv.	154320
DL	42000	CB	102880
Manu. o/h	159200
Total	257200	Total	257200
Finished Goods Inventory A/c
WIP	154320	COGS	138888
		CB	15432
Cost of Goods Sold A/c
FG Inv.	138888
3) Cost of Goods Sold Statement:
		Amount
Material:
Purchased	80000
Less:CB	24000
Direct mat. Applied		56000
Direct labor applied		42000
Manuf. Overhead		159200
Total Manuf. Costs incurred		257200
Less:WIP - CB		-102880
Finished Goods		154320
Less:FG-CB		-15432
Cost of Goods Sold		138888