Question

Prepare summary journal entries to record the following transactions for a company in its first month of operations. a. Raw materials purchased on account, $98,000. b. Direct materials used in production, $41,500. Indirect materials used in production, $18,800. c. Paid cash for factory payroll, $45,000. Of this total, $33,000 is for direct labor and $12,000 is for indirect labor. d. Paid cash for other actual overhead costs, $8,125. e. Applied overhead at the rate of 125% of direct labor cost. f. Transferred cost of jobs completed to finished goods, $63,000. g1. Jobs that had a cost of $63,000 were sold. g2. Sold jobs on account for $90,000.

Answer 1

Answer and Explanation:

The Journal entries are prepared below:-

a. Raw materials inventory Dr, $98,000

To Accounts payable $98,000

(Being raw material is purchased on the account is recorded)

b. Work in process inventory Dr, 41,500

To Raw materials inventory $41,500

(Being direct material used is recorded)

Factory overhead Dr, 18,800

To Raw materials inventory $18,800

(Being indirect material used is recorded)

c. Work in process inventory Dr, $45,000

Factory overhead Dr, $33,000

To Cash $78,000

(Being cash paid is recorded)

d. Factory overhead Dr, $8,125

To Cash $8,125

(Being cash paid is recorded)

e. Work in process inventory Dr, $56,250 (45,000 × 125% )

To Factory overhead $56,250

(Being overhead is recorded)

f. Finished goods inventory Dr, $63,000

To Work in process inventory $63,000

(Being transferred cost is recorded)

g, Cost of goods sold Dr, $63,000

To Finished goods inventory $63,000

(Being cost of goods sold is recorded)

Accounts receivable Dr, $90,000

To Sales $90,000

(Being sales value is recorded)