Pullman Inc. manufacturers chain hoists. The raw materials inventories on hand o
ID: 2419042 • Letter: P
Question
Pullman Inc. manufacturers chain hoists. The raw materials inventories on hand on October 1 were as follows:
Chain ............................................................. 12,000 lb, $24,000
Pulleys .......................................................... 4,000 sets, $20,000
Bolts and taps ………………………………. 10,000 lb, $5,000
Steel plates ………………………………….. 4,000 units, $2,000
The balances in the ledger accounts on October 1 were as follows:
Cash ……………………………………………………. $12,000
Work in process ……………………………………….. 35,000
Materials ………………………………………………... 51,000
Prepaid insurance ……………………………..………. 3,000
Machinery …………………………………………..……125,000
Accumulated depreciation-machinery ………………………………………. $10,500
Office equipment……………………………………….. 30,000
Accumulated depreciation-office equipment ………………………………… 4,800
Office furniture …………………………………………. 20,000
Accumulated depreciation-office furniture ………………………………….. 2,500
Accounts payable ……………………………………………………………. 30,000
Capital stock ………………………………………………………………… 182,200
Retained earnings …………………………………………………………… 46,000
__________ ___________
$276,000 $276,000
________________ ________________
_______________ ________________
Transactions during October were as follows:
A. Payroll recorded during the month: direct labor, $28,000; indirect labor, $3,000.
B. Factory supplies purchased for cash, $1,000. (Use a separate inventory account, Factory Supplies.)
C. Materials purchased on account: chain-4,000 lb, $8,800; pulleys-2,000 sets, $10,200; steel plates-5,000 units, $3,000.
D. Sales on account for the month, $126,375.
E. Accounts receivable collected, $72,500.
F. Materials used during October (FIFO costing): chain, 14,000 lb; pulleys, 4,400 sets; bolts and taps, 4,000 lb; steel plates, 3,800 units.
G. Payroll paid, $31,000.
H. Factory supplies on hand, October 31, $350.
I. Factory heat, light, and power costs for October, $3,000 (not yet paid).
J. Office salaries paid, $6,000.
K. Advertising paid, $2,000.
L. Factory superintendence paid, $1,800.
M. Expired insurance-on office equipment, $100; on factory machinery, $300.
N. Factory rent paid, $2,000.
O. Depreciation on office equipment, $400; on office furniture, $180; on machinery, $1,200.
P. Factory overhead charged to jobs, $11,950.
Q. Work in Process, October 31, $31,000. (Hint: The difference between the sum of the beginning balance in Work in Process plus the total charges to it during the period less the ending balance in Work in Process represents the cost of the goods completed during the period.)
R. Cost of goods sold during the month, $84,250.
S. Accounts payable paid, $33,750.
Required:
1. Set up T-accounts and enter the balances as of October 1.
2. Prepare journal entries to record each of the previous transactions.
3. Post the journal entries to the accounts, setting up any new ledger accounts necessary. Only controlling accounts are to be maintained; however, show the calculation for the cost of materials used.
4. Prepare a statement of cost of goods manufactured for October.
5. Prepare an income statement.
6. Prepare a balance sheet showing the classifications of current assets, plant and equipment, current liabilities, and stockholders’ equity.
Explanation / Answer
Record ing the journal entries is as follows:
Dec Account title and equation Debit($) Credit($) 1 Direct labor 28,000.00 Factory overhead 3,000.00 Wages payable 31000 (To record the labour expenses) 2 Factory supplies 1000 Cash 1000 3 Inventory 22000 Accounts payable 22000 4 Accounts receivable 126375 Sales 126375 (To record the sale) 5 Cash 72500 Accounts receivable 72500 (To record the collection) 6 Factory overhead 61040 Inventory 61040 (To record the consumption ) 7 Wages payable 31000 Cash 31000 (To record the payment of wages) 8 Factory heat and power 3000 Factory heat and power payable 3000 (To record the expense) 9 Office salaries 6000 Cash 6000 (To record the salaries) 10 Advertisement 2000 Cash 2000 (To record adv. Expesne) 11 Factory superintendance 1800 Cash 1800 (To record the expense) 12 Insurance 400 Prepaid insurance 400 (To record the expense) 13 Factory overhead 11950 Jobs 11950 (To record the factory overhead) 14 Factory rent 2000 Cash 2000 (To record the expense) 15 Depreciation 1780 Office equipment 400 Furniture 180 Machinery 1200 (To record the expense) 16 Cost of goods completed 31000 Worl in progress 31000 (Transfer made) 17 Cost of goods sold 84250 Cost of goods completed 84250 (Transfer made) 18 Accounts payable 33750 Cash 33750 (To record the payment)Related Questions
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