Question

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

a. Raw materials purchased on account, $210,000.
b. Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).
c. Accrued direct labor cost of $50,000 and indirect labor cost of $21,000.
d. Depreciation recorded on factory equipment, $104,000. Other manufacturing overhead costs accrued during October, $131,000.
f. The company applies manufacturing overhead cost to production using a predetermined rate of $5 per machine-hour. A total of 76,100 machine-hours were used in October.
g. Jobs costing $514,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
h. Jobs that had cost $453,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 36% above cost.

Required:
a. Prepare journal entries to record the information given above.
b. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant information above to each account. Compute the ending balance in each account, assuming that Work in Proccss has a beginning balance of $42,000.

Answer 1

The Polaris Company

a. Journal Entries

a. Debit Raw materials $210,000

Credit Accounts Payable $210,000

To record the purchase of raw materials on account.

b. Debit Work in Process $152,000

Debit Manufacturing Overhead $38,000

Credit Raw materials $190,000

To record raw materials used in production as direct and indirect.

c. Debit Work in Process $50,000

Debit Manufacturing Overhead $21,000

Credit Payroll $71,000

To record the costs of direct labor and indirect labor.

d. Debit Manufacturing Overhead $104,000

Credit Depreciation on factory equipment, $104,000

To record the depreciation expense.

Debit Manufacturing Overhead $131,000

Credit Other Expense $131,000

To record other manufacturing overhead costs.

f. Debit Work in Process $380,500

Credit Manufacturing Overhead $380,500

To record manufacturing overhead applied at the rate of $5 for 76,100 DLHs.

g. Debit Finished Goods $514,000

Credit Work in Process $514,000

To record the cost of goods manufactured.

h. Debit Cost of Goods Sold $453,000

Credit Finished Goods $453,000

To record the cost of goods sold.

Debit Accounts Receivable $616,080

Credit Sales Revenue $616,080

To record the sale of goods on account at 36% above cost.

b. T-accounts:

Manufacturing Overhead

Account Titles Debit Credit

Raw materials $38,000

Indirect labor cost 21,000

Factory depreciation 104,000

Other expenses 131,000

Work in Process $380,500

Overapplied overhead 86,500

Work in Process

Account Titles Debit Credit

Beginning inventory $42,000

Raw materials 152,000

Direct labor cost 50,000

Overhead 380,500

Finished Goods $514,000

Ending inventory $110,500

Step-by-step explanation:

a) Data and Analysis:

a. Raw materials $210,000 Accounts Payable $210,000

b. Work in Process $152,000 Manufacturing Overhead $38,000 Raw materials $190,000

c. Work in Process $50,000 Manufacturing Overhead $21,000 Payroll $71,000

d. Manufacturing Overhead $104,000 Depreciation on factory equipment, $104,000 Manufacturing Overhead $131,000 Other Expense $131,000

f. Work in Process $380,500 Manufacturing Overhead $380,500

g. Finished Goods $514,000 Work in Process $514,000

h. Cost of Goods Sold $453,000 Finished Goods $453,000

Accounts Receivable $616,080 Sales Revenue $616,080