The Polaris Company uses a job-order costing system. The following transactions

Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

Raw materials purchased on account, $210,000.

Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).

Accrued direct labor cost of $48,000 and indirect labor cost of $21,000.

Depreciation recorded on factory equipment, $105,000.

Other manufacturing overhead costs accrued during October, $130,000.

The company applies manufacturing overhead cost to production using a predetermined rate of $5 per machine-hour. A total of 76,100 machine-hours were used in October.

Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.

Jobs that had cost $449,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 30% above cost.

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 $34,000.

Raw materials purchased on account, $210,000.

Note: Enter debits before credits.

Record the raw materials issued to production, $190,000 ($152,000 direct materials and $38,000 indirect materials).

Note: Enter debits before credits.

Record the entry for accrued direct labor cost incurred, $48,000; indirect labor cost incurred, $21,000.

Note: Enter debits before credits.

Depreciation recorded on factory equipment, $105,000.

Note: Enter debits before credits.

Other manufacturing overhead costs accrued during October, $130,000.

Note: Enter debits before credits.

The company applies manufacturing overhead cost to production on the basis of $5 per machine-hour. A total of 76,100 machine-hours were recorded for October.

Note: Enter debits before credits.

Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.

Note: Enter debits before credits.

Record the cost of goods sold.

Note: Enter debits before credits.

Record the sales on account.

Note: Enter debits before credits.

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 $34,000.

Explanation / Answer

Journal Entry Serial No. Account Title & Explanations Debit ($) Credit ($) a) Raw material Inventory 210000 Accounts payable 210000 b) Work In Process 152000 Manufacturing Overhead 38000 Raw Material Inventory 190000 c) Work In Process 48000 Manufacturing overhead 21000 Salary & Wages Payable 69000 d) Manufacturing Overhead 105000 Accumulated Depreciation 105000 (depreciation on factory equipment recorded) e) Manufacturing overhead 130000 Accounts Payable 130000 f) Work in Process 380500 Manufacturing overhead 380500 (manufacturing overhead applied @$5 per hour for 76100 machine hours) g) Finished Goods 511000 Work In Process 511000 (job finished transferred to Finished goods account) h) Accounts Receivable 583700 Sales 583000 (Sales = 449000 * 130% = $583700 on account recorded) Cost of goods sold 449000 Finished Goods 449000 WIP Account date Account Amount date Account Amount Balance c/f 34000 g) Finished Goods 511000 b) Raw Material Inventory 152000 c) Cash - Direct Labour 48000 f) Manufacturing Overhead 380500 balance c/f 103500 614500 614500 Manufacturing Overhead date Account Amount date Account Amount b) Raw masterial Inventory 38000 f) Work In Process 380400 c) Cash - indirect labour 21000 d) Accumulated depreciation 105000 e) Accounts payable 130000 End Bal 86400 ( Overhead Overapplied) 380400 380400

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