Eastern Manufacturing uses a traditional job order cost system and keeps track o

Question

Eastern Manufacturing uses a traditional job order cost system and keeps track of inventories with a perpetual system. The company applies overhead to jobs using direct labor hours as a basis. The predetermined overhead rate is $20 per direct labor hour this year. Use the following account titles to prepare journal entries for selected events 1-9 that occurred during 2018 Cash Accounts receivable Accounts payable Sales Cost of goods sold Raw materials inventory Work in process inventory Finished goods inventory Manufacturing overhead Advertising expense Wages payable Accumulated depreciation Factory Labor costs Employer taxes payable 1. Raw materials are purchased on account for $500,000. Raw materials are requisitioned for use in production, $300,000 for direct materials and $50,000 for indirect materials. 2. 3. Factory labor costs of $200,000 are incurred, but not yet paid. Wages payable amount to $180,000 and Employer taxes payable amount to $20,000. 4. The company determines that the Factory labor (in 3. above) consists of direct labor of $160,000 and indirect labor of $40,000.

Explanation / Answer

Journal Entries Event No. Account Titles Debit Credit 1 Raw Material Inventory $500,000.00 Accounts Payable $500,000.00 2 Work in process Inventory $300,000.00 Manufacturing Overhead $50,000.00 Raw Material Inventory $350,000.00 3 Factory Labor costs $200,000.00 Wages Payable $180,000.00 Employer Taxes Payable $20,000.00 4 Work in process Inventory $160,000.00 Manufacturing Overhead $40,000.00 Factory Labor costs $200,000.00 5 Manufacturing Overhead $20,000.00 Accounts Payable $20,000.00 6 Work in process Inventory $100,000.00 Manufacturing Overhead $100,000.00 7 Finished Goods Inventory $500,000.00 Work in process Inventory $500,000.00 8-a Accounts Receivables $1,000,000.00 Sales $1,000,000.00 8-b Cost of goods sold $400,000.00 Finished Goods Inventory $400,000.00 9 Cost of goods sold $7,000.00 Manufacturing Overhead $7,000.00

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