Figure 5-14 Deluxe Design Company makes custom furniture. On December 1, there w

Question

Figure 5-14
Deluxe Design Company makes custom furniture. On December 1, there were two jobs in process, Job 683, with a cost of $14,200 and Job 684 with a cost of $23,500. Jobs 685, 686, and 687 were started during the month of December. Data on costs added during the month are as follows:

Overhead is applied to production at the rate of 80% of direct labor cost. Job 685 was completed on December 17. Job 684 was completed on December 21 and the client was billed at cost plus 45%. All other jobs remained in process.

Problem 5-23

Refer to Figure 5-14.

Prepare the journal entries to record the following:

The actual overhead for December was $41,100

Requisitioning of raw materials

Direct labor costs

Applied overhead

Transfer to finished goods

Sale of finished goods (assume sale was made on account)

Closing underapplied/overapplied variance (all variances are immaterial)

Job #683 Job #684 Job #685 Job #686 Job #687 Direct materials $11,000 $8,000 $31,400 $16,700 $6,000 Direct labor $21,000 $6,000 $12,300 $8,450 $2,500

Explanation / Answer

Journal Entry Date Particulars Dr. Amt Cr. Amt a. WIP          73,100 Direct Material          73,100 (Record the material issued) b. WIP                                                              50,250 Wages Payable          50,250 (Record the factory labor used) c. WIP                                                          40,200 Factory Overheads          40,200 (Records the Factory Overehead charged to WIP) d. WIP                                                               95,840 Finished Goods          95,840 (Record the Job 684 & 685 Completed and transferred to Finished goods) e-1 Cost of Goods Sold                       42,300 Finished Goods          42,300 (record the cost of goods sold) e-2 Accounts receivables                      61,335 Sales          61,335 (record the Job 684 sold) Sale of Job 684 = $42,300 X 145% = $61,335 f. Cost of Goods Sold              900 Factory Overhead 900 (record the underapplied overhead) Underapplied Overhead = $41,100 - $40,200 = $900 Job 683 684 685 686 687 Total Beginning Balance          14,200          23,500                    -   .                   -            37,700 Direct Material          11,000            8,000          31,400          16,700            6,000          73,100 Direct Labor          21,000            6,000          12,300            8,450            2,500          50,250 Factory Overhead - 80% of DL          16,800            4,800             9,840            6,760            2,000          40,200 Total          63,000          42,300          53,540          31,910          10,500       201,250 Fin. Fin.

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