Creation Co. uses a normal-costing system and allocates overhead to work in proc
ID: 2559393 • Letter: C
Question
Creation Co. uses a normal-costing system and allocates overhead to work in process at a rate of
$2.60 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials.
Requirements
1.
2.
Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account.
1.
Prepare journal entries to record the transactions for 2014 including an entry to close out over- or underallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be referenced as backup for the entry.2.
Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account.
Data Table Costs incurred: Purchases of direct materials (net) on credit Direct manufacturing labor cost Indirect labor Depreciation, factory equipment Depreciation, office equipment Maintenance, factory equipment Miscellaneous factory overhead Rent, factory building Advertising expense Sales commissions S 123,000 83,000 54,600 35,000 7,600 22,000 9,800 74,000 91,000 36,000 Inventories January 1, 2014 December 31,2014 9,900 $ Direct materials S Work in process Finished goods 14,000 27,000 25,000 6,000 64,000Explanation / Answer
Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Direct Material Control A/c Dr. 123,000 To Accounts Payable Control 123,000 (Record the purchase of direct material) 2 WIP Control A/c Dr. 118,900 To Direct Material Control A/c 118,900 (record the direct material used in WIP) 3 WIP Control A/c Dr. 83,000 Manufacturing Overhead Control A/c Dr. 54,600 To Wages Payable Control 137,600 (record the wages payble) 4 Manufacturing Overhead Control A/c Dr. 140,800 To Salaries Payable Control 22,000 To Accum. Depreciation Control 35,000 To Accounts Payable Control 9,800 To Factory Rent Control 74,000 (Record the manufacturing overhead) 5 WIP Control A/c Dr. 215,800 To Manufacturing Overhead Allocated 215,800 (record the manufacturing overahead allocated) Manufacturing Overhead Allocated = $2.60 X $83,000 Manufacturing Overhead Allocated = $215,800 6 Finished Goods Inventory Control Dr. 400,800 To WIP Control A/c 400,800 (record the finished goods produced). 7 Cost of Goods Sold Dr. 439,800 To Finished Goods Inventory Control 439,800 (Record the finished gods inventory sold) 8 Manufacturing Overhead Allocated Dr. 215,800 To Manufacturing Overhead Control 195,400 To Cost of Goods Sold (Under Allocation) 20,400 (Record the underallocation of overhead) Answer 2. WIP Control A/c Direct Material Control A.c Beg. Balance 6,000 (6) Finished Goods 400,800 Beg. Balance 9,900 (2) WIP Control Account 118,900 (2) Direct Material 123,000 (1) Accounts Payable 123,000 (3) Wages Payable 83,000 Ending Balance 27,000 Ending Balance 14,000 (5) Manf. Overhead Allocated 215,800 132,900 132,900 427,800 427,800 Finished Goods Inventory Control A/c Manufacturing Overhead Control A/c Beg. Balance 64,000 (7) Cost of Goods Sold 439,800 (3) Wages Payable 54,600 (8) Manufacturing Ovehead Allocated 195,400 (6) WIP Control 400,800 (4) Salaries Payable 22,000 Ending Balance 25,000 (4) Accum. Dep. 35,000 (4) Accounts Payable 9,800 464,800 464,800 (4) Factory Rent 74,000 195,400 195,400 Manufacturing Overhead Allocated Control A/c Cost of Goods Sold (8) Manufacturing Ovehead Control 195,400 (5) WIP Control 215,800 (7) Finished Goods Inventory 439,800 (9)Manufactuing Overhead Allocated 20,400 (9) Cost of Goods Sold 20,400 Balance C//f 419,400 215,800 215,800 439,800 439,800
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