Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, i

Question

Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $6,500, direct labor of $4,400, and applied overhead of $3,740. Custom Cabinetry applies overhead at the rate of 85% of direct labor cost. During July, Job 120 is sold (on account) for $22,500, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.

1. Prepare journal entries for the following in July.

Direct materials used in production.

Direct labor used in production.

Overhead applied.

The sale of Job 120.

Cost of goods sold for Job 120.

2. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory general ledger accounts. (Assume there are no jobs in Finished Goods Inventory as of June 30.)

July Product Costs Job 120 Job 121 Job 122 Total Direct materials $ 2,600 $ 6,300 $ 3,300 $ 12,200 Direct labor 3,100 4,600 2,600 10,300 Overhead applied ? ? ? ?

Explanation / Answer

Cost sheet Job 120 Job 121 Job 122 Total Beginning Cost 14640 Current cost: Material 2600 6300 3300 12200 Labor 3100 4600 2600 10300 Oh applied @ 85% of labour cost 2635 3910 2210 8755 Total cost 22975 14810 8110 31255 Status SOLD FINISHED WIP Journal entries: S.no. Accounts title and explanations Debit $ Credit $ 1 Work in process Inventory Account Dr. 12200       Raw material Inventory 12200 2 Work in Process Inventory Account Dr. 10300        Wages payable 10300 3 Work in Process Inventory Account Dr. 8755        Manufacturing Overehads 8755 4 Accounts receivable Account Dr. 22500        Sales revenue 22500 Cost of Goods sold Account Dr. 22975          Finished Goods Account 22975 Balance of WIP and Finished Goods: Finished Goods (Job 121): 14810 Work in process (Job 122): 8110

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