Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

Raw materials purchased on account, $210,000.
Raw materials used in production, $189,000 ($151,200 direct materials and $37,800 indirect materials).
Accrued direct labor cost of $50,000 and indirect labor cost of $21,000.
Depreciation recorded on factory equipment, $106,000.
Other manufacturing overhead costs accrued during October, $130,000.
The company applies manufacturing overhead cost to production using a predetermined rate of $10 per machine-hour.
A total of 76,300 machine-hours were used in October.
Jobs costing $515,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
Jobs that had cost $448,000 to complete according to their job cost sheets were shipped to customers during the month.
These jobs were sold on account at 30% above cost.
Required:
1. Prepare journal entries to record the transactions given above.
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $36,000.
Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $36,000.
Required 2
Manufacturing Overhead Work in Process
Beg. Bal.
End. Bal.
End. Bal.

Answer 1

The Polaris Company

1. Journal Entries

Debit Raw materials $210,000

Credit Accounts payable $210,000

To record the purchase of raw materials on account.

Debit Work in Process $151,200

Debit Manufacturing Overhead $37,800

Credit Raw materials $189,000

To record materials used in production.

Debit Work in Process $50,000

Debit Manufacturing Overhead $21,000

Credit Accrued Labor Cost $71,000

To record the accrual of labor costs.

Debit Manufacturing Overhead $106,000

Credit Depreciation Expense $106,000

To record depreciation expense.

Debit Manufacturing Overhead $130,000

Credit Accrued Overhead $130,000

To record other manufacturing overhead costs.

Debit Work in Process $763,000

Credit Overhead applied $763,000

To record the overhead applied at $10 per machine hour.

Debit Finished Goods $448,000

Credit Work in Process $448,000

To record the transfer of finished goods.

Debit Cost of Goods Sold $448,000

Credit Finished Goods $448,000

To record finished goods transferred to cost of goods sold.

Debit Accounts Receivable $582,400

Credit Sales Revenue $582,400

To record the sale of goods on account.

2. T-accounts for:

Manufacturing Overhead

Account Titles Debit Credit

Raw materials $37,800

Indirect labor costs 21,000

Depreciation expense 106,000

Other overhead costs 130,000

Work in Process $763,000

Ending balance $468,200

Work in Process

Account Titles Debit Credit

Beginning balance $36,000

Raw materials 151,200

Direct labor costs 50,000

Manufacturing overhead 763,000

Finished Goods $448,000

Ending balance $552,200

Step-by-step explanation:

a) Data and Analysis of October Transactions:

Raw materials $210,000 Accounts payable $210,000

Work in Process $151,200 Manufacturing Overhead $37,800 Raw materials $189,000

Work in Process $50,000 Manufacturing Overhead $21,000 Accrued Labor Cost $71,000

Manufacturing Overhead $106,000 Depreciation Expense $106,000

Other Manufacturing Overhead $130,000 Accrued Overhead $130,000

Work in Process $763,000 Overhead applied $763,000

Overhead Rate = $10 per machine hour

Total machine-hours used in October = 76,300 machine-hours

Finished Goods $448,000 Work in Process $448,000

Cost of Goods Sold $448,000 Finished Goods $448,000

Accounts Receivable $582,400 Sales Revenue $582,400 ($448,000 * 1.3)