Hi, can I get some help with explanantions? ABC, Corp. is a manufacturing firm t

Question

Hi, can I get some help with explanantions?

ABC, Corp. is a manufacturing firm that uses job-order costing. The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 50,000 machine-hours and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a. Raw materials were purchased, $325,000.
b. Raw materials were requisitioned for use in production, $175,000 ($100,000 direct and $75,000 indirect).
c. The following employee costs were incurred: direct labor, $215,000; indirect labor, $40,000; and accountant salaries, $85,000.
d. Advertising costs, $225,000.
e. Factory rent costs, $25,000.
f. Depreciation for the year was $150,000 of which $80,000 is related to factory operations and $70,000 is related to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 25,000 machine-hours.
h. The cost of goods manufactured for the year was $490,000.
i. Sales for the year totaled $980,000 and the costs on the job cost sheets of the goods that were sold totaled $350,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.

Required:

Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.

Explanation / Answer

Journal entries: S.no. Accounts title and explanations Debit $ Credit $ a. Raw material inventory Dr. 325000     Cassh account 325000 b. Work in process inventory Dr. 100000 Manufacturing Overheads Dr. 75000      Raw material inventory 175000 c. Work in process inventory Dr. 215000 Manufacturing Overheads Dr. 40000 Selling Genrral and Admin OH Dr. 85000     Cash account 340000 d. Selling Genrral and Admin OH Dr. 225000     Cash account 225000 e. Manufacturing Overheads Dr. 25000      Cash account 25000 f. Manufacturing Overheads Dr. 80000 Selling Genrral and Admin OH Dr. 70000      Accumulated depreciation 150000 g. Work in process inventory Dr. 225000     Manufacturing Overheads (25000*9) 225000 h. Finished Goods inventory Dr. 490000      Work in process inventory 490000 i. Cash account Dr. 980000      Sales revenue account 980000 Cost of Goods sold Dr. 350000      Finished Goods inventory 350000 j. Manufacturing Overheads Dr. 5000     Cost of goods sold 5000 Note: OH rate per MH: Estimated Overheads 450000 Divide: Estimated MH 50000 OH rate per MH: 9 Overheads Under-applied: Actual Manufacturing Incurred: Indirect material 75000 Indirect Labour 40000 Factory rent 25000 Depreciation 80000 Actual OH incurred 220000 Less: OH applied 225000 Over-applied OH 5000

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