Need help answering book question EXERCISE 3-5 Journal Entries and T-accounts LO

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EXERCISE 3-5 Journal Entries and T-accounts LO3-1, LO3-2 The Polaris Company uses a job-order costing system. The following transactions occurred in October: a. Raw materials purchased on account, $210,000. b. Raw materials used in production, $190,000 ($178,000 direct materials and $12,000 indirect materials). c. Accrued direct labor cost of $90,000 and indirect labor cost of $110,000. d. Depreciation recorded on factory equipment, $40,000. e. Other manufacturing overhead costs accrued during October, $70,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $8 per machine-hour. A total of 30,000 machine-hours were used in October. g. Jobs costing $520,000 according to their job cost sheets were completed during October and transferred to Finished Goods. Jobs that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 25% above cost. h. Required: 1. Prepare journal entries to record the transactions given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $42,000.

Explanation / Answer

a Raw material inventory 210000             Accounts payable 210000 b Work in progress 178000 Manufacturing overheads 12000             Raw material inventory 190000 c Work in progress 90000 Manufacturing overheads 110000              Wages payable 200000 d Manufacturing overheads 40000              Accumulated depreciation-factory equipment 40000 e Manufacturing overheads 70000            Accounts payable 70000 f Work in progress 240000 (30000*8)             Manufacturing overheads 240000 g Finished goods inventory 520000             Work in progress 520000 h Accounts receivable 600000 (480000*1.25)             Sales revenue 600000 Cost of goods sold 480000             Finished goods inventory 480000 Manufacturing overheads b 12000 240000 f c 110000 d 40000 e 70000 232000 240000 Ending balance 8000 Work in progress Beginning balance 42000 520000 g b 178000 c 90000 f 240000 550000 520000 Ending balance 30000

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