The transactions listed below occurred during the current month. Prepare the jou
ID: 2393999 • Letter: T
Question
The transactions listed below occurred during the current month. Prepare the journal entries for each transaction and match the correct amount, account, debit or credit that follows.
Total materials issued to production, $145,000 of which $115,000 was traceable to specific jobs.
Labor costs incurred during the period totaled $280,000, of which $80,000 related to factory supervisors and factory custodians.
Depreciation recorded on equipment was $52,000. $45,000 of this amount was on equipment used in factory operations, and the remaining $7,000 was for equipment used in the corporate office.
Manufacturing overhead is applied to production at the rate of $6.00 per machine hour. Planned machine hours were 70,000 but due to greater demand, the company worked 80,000 machine hours during the year.
Goods costing $900,000 were completed during the year.
Transaction A: Amount recorded in Work in Process account
Transaction B: Amount recorded in Work in Process account
Transaction B: Amount recorded in Wages Payable account
Transaction D: Amount recorded in Accumulated Depreciation account
Transaction D: Amount recorded in Work in Process account
Transaction E: Amount recorded Manufacturing Overhead account
- A. B. C. D. E. F.Transaction A: Amount recorded in Work in Process account
- A. B. C. D. E. F.Transaction B: Amount recorded in Work in Process account
- A. B. C. D. E. F.Transaction B: Amount recorded in Wages Payable account
- A. B. C. D. E. F.Transaction D: Amount recorded in Accumulated Depreciation account
- A. B. C. D. E. F.Transaction D: Amount recorded in Work in Process account
- A. B. C. D. E. F.Transaction E: Amount recorded Manufacturing Overhead account
Explanation / Answer
Job cost system (job costing) accumulates fees incurred in line with the individual jobs. Corporations ordinarily use job cost methods when they can identify separate products or when they produce goods to satisfy a purchasers precise wants.
Who makes use of job costing? Examples incorporate house builders who design unique residences for each consumer and accumulate the expenses separately for every job, and caterers who accumulate the expenses of each ceremonial dinner individually. Consulting, law, and public accounting corporations use job costing to measure the costs of serving each and every patron. Movement pix, printing, and other industries where specific jobs are produced use job costing. Hospitals additionally use job costing to verify the cost of each and every sufferers care.
We will use the following glide chart to help us document the transactions in job costing (click job fee waft for a printable variant complete with journal entry examples):
In a journal entry, we will do entries for each letter labeled within the chart the place the arrow is pointing TO is our debit and the place the arrow is coming FROM is our credit. Here is a video discussion of job rate journal entries and then we will be able to do an illustration.
Example
anticipate inventive Printers is a company run by using a gaggle of pupils who use computing device publishing to supply strong point books and guide manuals. Inventive Printers makes use of job costing. Creative Printers keeps track of the time and materials (usually paper) used on each job.
The manufacturer compares the fee of each job with the earnings got to be definite the roles are rewarding. Commonly the organization learns that targeted jobs are too pricey on the grounds that the prices they can charge. For example, ingenious Printers not too long ago learned that cookbooks were not beneficial. On the other hand, printing instruction manuals was fairly moneymaking, so the corporation has focused extra on the guide handbook market. To illustrate a job costing system, this part describes the transactions for the month of July for creative Printers.
On July 1, inventive Printers had these establishing inventories:
substances stock (or uncooked materials inventory) $20,000
Work in process stock
(Job No. 106: direct substances, $four,200;direct labor, $5,000; and overhead, $four,000)
thirteen,200
completed items inventory (Job No. One hundred and five) 5,500
ingenious Printing had accomplished Job No. One zero five, a set of gardening books, but had now not shipped them to the purchaser as of June 30. Additional know-how regarding July transactions follows:
a. In the course of July, ingenious Printers purchased $ 25,000 of substances on account. This purchase incorporated each direct materials, reminiscent of paper, and indirect materials, corresponding to printing presents and computer provides. The journal entry required would be:
Debit credit score
a. Uncooked substances inventory $ 25,000
money owed Payable 25,000
bought substances on account
b. For the period of July, inventive Printers sent direct substances from the substances storeroom to jobs as follows: $ 9,000 to Job No. 106, and $ 14,000 to Job No. 107. The organization also despatched oblique materials of $ 1,000 to jobs. We want to transfer the fee of the direct materials FROM raw substances inventory TO work in system inventory. It charged indirect materials to overhead, not to each job, due to the fact that the organization does now not maintain track of how a lot indirect materials it makes use of on each and every job. (Manufacturing businesses frequently use Manufacturing (or manufacturing facility) Overhead for the Overhead account. We more commonly use the Overhead account for both manufacturing and non-manufacturing organizations on this chapter.) The entries can be:
Debit credit score
b. Work In system inventory 23,000
raw substances stock 23,000
document direct materials used ($9,000+ 14,000)
Overhead 1,000
uncooked substances stock 1,000
record indirect materials used
c. Creation staff hold monitor of the time spent on each job at ingenious Printers. Established on that knowledge, the company assigned creation-associated labor fees to jobs (direct labor) and to Overhead as follows: $4,000 to Job No. 106, $ sixteen,000 to Job No. 107, and oblique labor of $ 2,000 to Overhead. The entry to record payroll incurred during the accounting interval (not shown) entails a debit to Payroll abstract (or manufacturing facility Payroll) and a credit to money or a legal responsibility debts depending if it has been paid. In these entries, we can distribute the payroll summary (manufacturing unit Payroll) to the jobs and overhead. For direct labor, we wish to take the price of labor FROM the payroll summary account TO work in process stock. For oblique labor, we will be able to cost this to overhead rather of to a distinctive job in work in approach stock.
Debit credit score
c. Work In system stock 20,000
manufacturing facility Payroll 20,000
record direct labor used ($4,000+ 16,000)
Overhead 2,000
factory Payroll 2,000
file indirect labor used
d. The organization assigns overhead to every job on the groundwork of the desktop-hours each job makes use of. Overhead is assigned to a job on the fee of $ 2 per computer-hour used on the job. Job sixteen had 875 computer-hours so we might charge overhead of $1,750 (850 computing device-hours x $2 per laptop-hour). Job 17 had four,050 machine-hours so overhead can be $eight,one hundred (4,050 laptop-hours x $2). The journal entry to apply or assign overhead to the jobs would be to move the fee FROM overhead TO work in process inventory.
Debit credit
d. Work In process stock 9,850
Overhead 9,850
document overhead utilized ($1,750+ 8,a hundred)
The whole job cost sheets for Jobs 106 and 107 would show up as beneath:
Job: 106 107
starting Work in method $13,200 0
added this interval:
Direct substances 9,000 14,000
Direct Labor 4,000 16,000
Overhead applied 1,750 eight,one hundred
complete Job expenses $ 27,950 $ 38,100
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