Fort Corporation had the following transactions during its first month of operat

Question

Fort Corporation had the following transactions during its first month of operations: 1. Purchased raw materials on account, $85,000. 2 materials requisition slips indicated that $6,000 was classified as indirect Raw Materials of $30,000 were requisitioned to the factory. An analysis of the materials. Factory labor costs incurred were $175,000 of which $145,000 pertained to factory wages payable and $30,000 pertained to employer payroll taxes payable. Time tickets indicated that $145,000 was direct labor and $30,000 was indirect labor. 3. 4. 5. Overhead costs incurred on account were $198,000. 6. Manufacturing overhead was applied at the rate of 150% of direct labor cost. 7 Goods costing $115,000 are still incomplete at the end of the month; the other goods were completed and transferred to finished goods. Finished goods costing $100,000 to manufacture were sold on account for $130,000. 8.

Explanation / Answer

Journal entry :

Cost of goods manufactured = 24000+145000+217500-115000 = 271500

No account and explanation debit credit 1 Raw material 85000 Account payable 85000 (To record purchase raw material) 2 Work in process 24000 Manufacturing overhead 6000 Raw material 30000 (To record material requisitioned) 3 Factory labour 175000 Factory wages payable 145000 Factory payroll tax payable 30000 (To record wages incurred) 4 Work in process 145000 Manufacturing overhead 30000 Factory labour 175000 (To record factory labour) 5 Manufacturing overhead 198000 Account payable 198000 (To record manufacturing overhead) 6 Work in process (145000*150%) 217500 Manufacturing overhead 217500 (To record overhead applied) 7 Finished goods 271500 Work in process 271500 (To record cost of goods manufactured) 8 Account receivable 130000 Sales revenue 130000 Cost of goods sold 100000 Finished goods 100000 (To record sales and cost of goods sold)

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