Question

The following transactions occurred in April at Steve’s Cabinets, a custom cabinet firm. Purchased $19,500 of materials on account. Issued $1,150 of supplies from the materials inventory. Purchased $11,900 of materials on account. Paid for the materials purchased in transaction (1) using cash. Issued $14,300 in direct materials to the production department. Incurred direct labor costs of $23,500, which were credited to Wages Payable. Paid $21,900 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant. Applied overhead on the basis of 130 percent of $23,500 direct labor costs. Recognized depreciation on manufacturing property, plant, and equipment of $10,700. The following balances appeared in the accounts of Steve’s Cabinets for April. Beginning Ending Materials Inventory $ 30,690 ? Work-in-Process Inventory 7,300 ? Finished Goods Inventory 33,900 $ 28,990 Cost of Goods Sold 53,730 Required: a. Prepare journal entries to record the transactions. b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Answer 1

Steve's Cabinets

a. Journal Entries:

Debit Raw materials $19,500

Credit Accounts Payable $19,500

To record the purchase of raw materials on account.

Debit Manufacturing Overhead $1,150

Credit Raw materials $1,150

To record the issue of supplies from inventory.

Debit Raw materials $11,900

Credit Accounts Payable $11,900

To record the purchase of raw materials on account.

Debit Accounts Payable $19,500

Credit Cash Account $19,500

To record payment for raw materials on account.

Debit Work in Process $14,300

Credit Raw materials $14,300

To record the issue of raw materials to production.

Debit Work in Process $23,500

Credit Wages Expense $23,500

To record the transfer of factory wages to production.

Debit Utilities, etc expense $21,900

Credit Cash Account $21,900

Debit Manufacturing overhead $21,900

Credit Utilities, etc expenses $21,900

To record miscellaneous plant expenses.

Debit Work in Process $30,550

Credit Manufacturing overhead $30,550

To apply 130% of direct labor cost of #23,500 to production.

Debit Manufacturing Overhead $10,700

Credit Depreciation Expense $10,700

To recognize depreciation expense.

b. T-accounts

Raw Materials

Account Titles Debit Credit

Beginning balance $ 30,690

Accounts Payable 19,500

Manufacturing overhead $1,150

Accounts Payable 11,900

Work in Process 14,300

Ending balance $ 46,640

$62,090 $62,090

Accounts Payable

Account Titles Debit Credit

Raw materials $19,500

Raw materials 11,900

Cash Account $19,500

Ending balance 11,900

Manufacturing Overhead

Account Titles Debit Credit

Raw materials $1,150

Expenses 21,900

Depreciation 10,700

Work in Process $30,550

Underapplied: Cost of goods sold 3,200

Work in Process

Account Titles Debit Credit

Beginning balance $ 7,300

Raw materials $14,300

Direct labor 23,500

Manuf. Overhead 30,550

Finished Goods $48,820

Ending balance $26,830

Finished Goods Inventory

Account Titles Debit Credit

Beginning balance $ 33,900

Work in Process 48,820

Cost of goods sold $53,730

Ending balance $ 28,990

Cost of goods sold

Account Titles Debit Credit

Finished goods $53,730

Manufacturing overhead:

Underapplied 3,200

Income Statement $56,930

Step-by-step explanation:

a) Data and Calculations:

Account Balances of Steve’s Cabinets for April.

Beginning Ending

Materials Inventory $ 30,690 ?

Work-in-Process Inventory 7,300 ?

Finished Goods Inventory 33,900 $ 28,990

Cost of Goods Sold 53,730