Pullman Inc. manufacturers chain hoists. The raw materials inventories on hand o
ID: 2419274 • 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.
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.
Explanation / Answer
3. A. Work in progress $28,000
Manufacturing overheads $3,000
wages payable $31,000
B. Factory supplies $1,000
Cash $1,000
C. Materials $22,000
Accounts payable $22,000
D. Accounts receivable $126,375
Sales revenue $126,375
E. Cash $72,500
Accounts receivable $72,500
F. work in progress $54,340
Materials $54,340
G. wages payable $31,000
cash $31,000
H. manufacturing overheads $650
factory supplies $650
I. manufacturing overheads $3,000
accounts payable $3,000
J. Salaries $6,000
Cash $6,000
K. Advertisement expense $2,000
Cash $2,000
L. manufacturing overheads $1,800
Cash $1,800
M. Insurance expense $100
manufacturing overheads $300
Prepaid insurance $400
N. manufacturing overheads $2,000
cash $2,000
O. Depreciation expense $580
manufacturing overheads $1,200
accumulated depreciation machinery $1,200
accumulated depreciation office furniture $180
accumulated depreciation equipment $400
P. work in progress $11,950
manufacturing overheads $11,950
Q. Finshed goods $98,290 (35,000+28,000+54340+11,950-31,000)
Work in progress $98,290
R. Cost of goods sold $84,250
Finished Goods $84,250
S. Acoounts payable $33,750
Cash $33,750
cost of material used FIFO
Chain 14,000lbs for 12,000lbs = $24,000 2,000 lbs = $4,400 $24,000 + $4,400= $28,400
Pulleys 4,400 sets for 4,000sets = $20,000 400 sets = $2,040 $20,000 + $2,040 = $22,040
bolts and taps for 4,000 lbs = $2,000
Steel plates for 3,800 units = $1,900
cost of material used $28,400 + $22,040 +$2,000 + $1,900 = $54,340
4. cost of material used $54,340
direct labor $28,000
manufacturing overehead
indirect labor $3,000
Supplies expense $650
factory expense $3,000
factory salaries $1,800
fatory insurance $300
Factory rent $2,000
Factory depreiation $1,200 $11,950
Add work in progress beginning $35,000
$129,290
Less work in progress ending -$31,000
Cost of goods manufactured $98,290
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