Thirteenth Edition College Accounting Chapters 1-30 Chapter 27 Problem Set A OBJ

Question

Thirteenth Edition College Accounting Chapters 1-30

Chapter 27 Problem Set A

OBJECTIVE: Recording purchase and issuance of direct and indirect materials, recording labor costs, applying overhead, computing overapplied or underapplied overhead, recording cost of jobs completed, and cost of goods sold.

In April 2013, NoCal Trailers Co. had the following cost data:

COST DATA

a. Raw materials costing $82,000 were purchased.

b. Raw materials costing $80,000 were used: direct materials, $75,000; indirect materials $5,000.

c. Factory wages of $52,000 were incurred: direct labor $50,000; indirect labor $2,000. Social security tax deductions were $3,224, Medicare tax deductions were $754, federal income tax deductions were $7,800.

d. Other overhead costs of $28,000 were incurred. (Credit Accounts Payable.)

e. Estimated manufacturing overhead costs were applied to jobs in production at the rate of 80 percent of direct labor costs

f. Finished goods costing $150,000 were transferred from production to the warehouse.

g. The cost of goods sold was $120,000.

h. Sales on account for the month were $250,000.

INSTRUCTIONS (These are to be created in separate worksheets called the general journal, Manufacturing Overhead Computations worksheet, and the partial income statement)

1. Prepare general journal entries to record each item of cost data given. Use the account titles listed in your textbook.

2. Compute the amount of over applied or under applied overhead for the month.

3. Prepare a partial income statement for April. Adjust the Cost of Goods Sold for any over applied or under applied overhead.

Analyze: Based on the partial income statement you have prepared, what portion of each sales dollar is realized as gross profit?,

Explanation / Answer

Req 1. Journal entries: S.no. Accounts title and explanations Debit $ Credit $ a. Raw material Inventory Dr. 82000      Accounts payable account 82000 b. Work in process inventory Dr. 75000 Manufacturing Overheads Dr. 5000     Raw material Inventory account 80000 c. Factory wages expense Dr. 52000     Social Security tax payable 3224     Medicare tax payable 754     Federal income tax payable 7800     Wages payable 40222 Work in process inventory Dr. 50000 Manufacturing overheads Dr. 2000      Factory wages expense account 52000 d. Manufacturing Overheads Dr. 28000     Accounts payable account 28000 e. Work in process Account Inventory Dr. 40000     Manufacturing Overheads 40000 f. Finished Goods inventory Dr. 150000    Work in process inventory Account 150000 g. Cost of Goods sold Account Dr. 120000     Finished Goods inventory 120000 h. Accounts receivable Dr. 250000     Sales revenue account 250000 Req 2: Under/Over applied Overheads: OH actually incurred (5000+2000+28000) 35000 OH applied (50000*80%) 40000 Over-applied OH 5000 Req 3: Income Statement: Sales revenue 250000 Less: Adjusted Cost of Goods sold Cost of goods sold unadjusted 120000 Less: Over-applied Overheads 5000 115000 Gross Margin 135000

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