The Polaris Company uses a job-order costing system. The following transactions
ID: 2331369 • Letter: T
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 $49,000 and indirect labor cost of $20,000.
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 $6 per machine-hour. A total of 76,200 machine-hours were used in October.
Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
Jobs that had cost $452,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 28% 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.
Explanation / Answer
SOLUTION:
1) Journal entries:
Particulars
Debit
Credit
a
Raw materials inventory
210,000
Accounts payable
210,000
b
Work in process
189,000
Manufacturing overhead
151,200
Raw materials inventory
37,800
c
Work in process
49,000
Manufacturing overhead
20,000
Salaries and wages payable
69,000
d
Manufacturing overhead
106,000
Accumulated depreciation
106,000
e
Manufacturing overhead
130,000
Accounts payable
130,000
f
Work in process
457,200
Manufacturing overhead
457,200
g
Finished goods
511,000
Work in process
511,000
h
Accounts receivable
578,560
Sales
578,560
i
Cost of goods sold
452,000
Finished goods
452,000
2)
Manufacturing overhead
(b)
37,800
(f)
457,200
(c )
20,000
(d)
106,000
(e )
130,000
Ending balance
163,400
Work in Process
Beginning balance
36,000
(g)
511,000
(b)
151,200
(c )
49,000
(f)
457,200
Ending balance
182,400
Particulars
Debit
Credit
a
Raw materials inventory
210,000
Accounts payable
210,000
b
Work in process
189,000
Manufacturing overhead
151,200
Raw materials inventory
37,800
c
Work in process
49,000
Manufacturing overhead
20,000
Salaries and wages payable
69,000
d
Manufacturing overhead
106,000
Accumulated depreciation
106,000
e
Manufacturing overhead
130,000
Accounts payable
130,000
f
Work in process
457,200
Manufacturing overhead
457,200
g
Finished goods
511,000
Work in process
511,000
h
Accounts receivable
578,560
Sales
578,560
i
Cost of goods sold
452,000
Finished goods
452,000
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