The Polaris Company uses a job-order costing system. The following transactions

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, $188,000 ($150,400 direct materials and $37,600 indirect materials).

Accrued direct labor cost of $48,000 and indirect labor cost of $21,000.

Depreciation recorded on factory equipment, $104,000.

Other manufacturing overhead costs accrued during October, $130,000.

The company applies manufacturing overhead cost to production using a predetermined rate of $7 per machine-hour. A total of 76,400 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 $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 40% 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 $35,000.

Explanation / Answer

Journal entries No General journal Debit Credit a. Raw materials 210,000 accounts payable 210,000 b. Work in process inventory 150,400 manufacturing overhead 37,600 Raw materials 188,000 c. Work in process inventory 48,000 manufacturing overhead 21,000 Wages payable 69,000 d. Manufacturing overhead 104,000 Accumulated depreciation 104,000 e. Manufacturing overhead 130,000 Accounts payable 130,000 f. Work in process inventory 534800 manufacturing overhead 534,800 (76,400*7) g. Finished goods 511,000 Work in process inventory 511,000 h. Cost of goods sold 450,000 finished goods 450,000 Accounts receivable 630000 sales (450000*140%) 630,000 Manufacturing overhead b. 37,600 f. 534,800 c. 21,000 d. 104,000 e. 130,000 End bal 242,200 Work In process inventory Beg bal 35,000 g. 511,000 b. 150,400 c. 48,000 f. 534,800 end bal 257,200

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