Question

Barry Company produces custom bikes. There are no beginning raw material and work in process inventories. The transactions or events during the year are as follows: 1. Raw materials purchased were $88,000 in cash. 2. Labor cost was $44,000, of which $20,000 were traceable to different jobs and $24,000 were untraceable to the jobs. The labor cost was paid in cash. 3. $48,000 of raw materials were issued for production and traceable to different jobs. $2,000 of raw materials were used as tools. Managers determined that $2,000 of raw materials used as tools were immaterial and there was no point in tracing the amount of $2,000 to particular jobs. 4. Rent amounted to $60,000 in cash, 40% of the rent was used for the factory. 60% of the rent was used for the office. 5. Supervisor's salaries and factory cleaning were $20,000 and $10,000, respectively. The amounts were paid in cash. 6. During the year, the goods completed amounted to $120,000. 7. Barry Company uses direct labor hours as cost driver (allocation base) to allocate (apply) the manufacturing overhead. During the year, the estimated manufacturing overhead is $90,000 and the estimated direct labor hours are 10,000 hours. Barry used 15,000 hours during the year. 8. Barry Company sold the finished goods costing $100,000 at a selling price of $130,000 on account. Required: Prepare journal entries to account for the transactions or events 1-8.

Answer 1

The journal entries for the given transactions are as follows: 1) Debit Raw Materials and Credit Cash, 2) Debit Cash, Direct Labor, and Credit Manufacturing Overhead, 3) Debit Work in Process and Credit Raw Materials, and so on.

Step-by-step explanation:

To prepare the journal entries for the transactions or events 1-8, we need to understand the different accounts involved and the impact of each transaction on those accounts. Here are the journal entries for the given transactions:

1. Cash (debit) - $88,000
   Raw Materials (credit) - $88,000
2. Cash (debit) - $44,000
   Direct Labor (debit) - $20,000
   Manufacturing Overhead (credit) - $24,000
3. Work in Process (debit) - $48,000
   Raw Materials (credit) - $48,000
4. Factory Rent (debit) - $24,000
   Office Rent (debit) - $36,000
   Cash (credit) - $60,000
5. Supervisor's Salaries (debit) - $20,000
   Factory Cleaning (debit) - $10,000
   Cash (credit) - $30,000
6. Finished Goods Inventory (debit) - $120,000
   Work in Process (credit) - $120,000
7. Accounts Receivable (debit) - $130,000
   Sales Revenue (credit) - $130,000
   Cost of Goods Sold (debit) - $100,000
   Finished Goods Inventory (credit) - $100,000