Question

Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $6,700, direct labor of $3,600, and applied overhead of $3,060. Custom Cabinetry applies overhead at the rate of 85% of direct labor cost. During July, Job 120 is sold (on account) for $23,500, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.July Product Costs Job 120 Job 121 Job 122 TotalDirect Materials $1,500 $7,400 $4,000 $12,900Direct Labor 3,800 3,800 2,800 10,400Overhead Applied ? ? ? ?1. Prepare journal entries for the following in July.a. Direct materials used in production.b. Direct labor used in production.c. Overhead applied.d. The sale of Job 120e. cost of goods sold for Job 1202. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory general ledger accountsCustom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $8,900, direct labor of $4,000, and applied overhead of $3,600. Custom Cabinetry applies overhead at the rate of 90% of direct labor cost. During July, Job 120 is sold (on account) for $24,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.

Answer 1

1. Direct materials used in production

Dr Work in process inventory $12,900

Cr Raw materials inventory $12,900

b. Direct labor used in production

Dr Work in process inventory $10,400

Cr Factory payroll payable $10,400

c. Overhead applied

Dr Work in process inventory $8,840

Cr Factory overhead $8,840

d. The sale of Job 120

Dr Accounts receivable $23,500

Cr Sales $23,500

e. Cost of goods sold for Job 120

Dr Cost of goods sold$21,890

Cr Finished goods inventory$21,890

2. Work in Process $9,180

Finished Goods $14,430

Step-by-step explanation:

1. Preparation of the journal entries for the month of July

a. Preparation of the Journal entry to record Direct materials used in production

Dr Work in process inventory $12,900

Cr Raw materials inventory $12,900

(To record materials used in production)

b. Preparation of the journal entry to record Direct labor used in production

Dr Work in process inventory $10,400

Cr Factory payroll payable $10,400

(To record the cost of labor used in production)

c. Preparation of the journal entry to record Overhead applied

Dr Work in process inventory $8,840

Cr Factory overhead $8,840

[ $10,400 * 85% ]

(To record overhead cost applied to production)

d. Preparation of the journal entry to record The sale of Job 120

Dr Accounts receivable $23,500

Cr Sales $23,500

(To record the sale of Job 120)

e. Preparation of the journal entry to record the cost of goods sold for Job 120

Dr Cost of goods sold$21,890

Cr Finished goods inventory$21,890

[($6,700 + $3,600 + $3,060 + $1,500 + 3,800) + (3,800 * 85%)= $21,890]

(To record the cost of Job 120 sold)

2. Computation for the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory general ledger accounts

Work in Process Finished Goods

Job # Job 122 Job 121

Direct materials

$4,000 $7,400

Direct labor

$2,800 $3,800

Overhead $2,380 $3,230

[$2,800*85%=$2,380] [$3,800*85%=$3,230]

Total cost $9,180 $14,430

Therefore The July 31 balances of the Work in Process Inventory is $9,180 and the Finished Goods Inventory general ledger accounts is $14,430