Sierra Company manufactures woven blankets and accounts for product costs using
ID: 2461046 • Letter: S
Question
Sierra Company manufactures woven blankets and accounts for product costs using process costing. The company uses a single processing department. The following information is available regarding its May inventories
Compute the cost of products transferred from production to finished goods and cost of goods sold.
Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (h) overhead applied, (i) goods transferred from production to finished goods, and (j) sale of finished goods.
Journal Entry required for below transaction:
1. Record purchase of raw materials.
2. Record direct materials used in production.
3. Record indirect materials used in production.
4. Record direct labor cost incurred, but not yet paid.
5. Record indirect labor cost incurred, but not yet paid.
6. Record payment of total factory payroll.
7. Record other overhead costs incurred (credit Other accounts).
8. Record overhead applied at 110% of direct labor cost.
9. Record the transfer of completed products from production to finished goods inventory.
10. Record the sale of finished goods.
11.Record cost of goods sold for May.
Sierra Company manufactures woven blankets and accounts for product costs using process costing. The company uses a single processing department. The following information is available regarding its May inventories
Explanation / Answer
Solution:
1)
Cost of products transferred from production (WIP) to finished goods = $953,000
Cost of goods sold = $1,476,999
Raw Materials (RM)
Work in Process (WIP)
Particulars
Amount
Particulars
Amount
Particulars
Amount
Particulars
Amount
To balance b/d
$64,000
By WIP (Direct Material)
$203,000
To balance b/d
$438,000
By Finished Goods (Completed units transferred)
$953,000
To Accounts Payable
$260,000
BY Factory Overhead (Indirect Material)
$80,000
To RM
$203,000
By balance c/d
$41,000
To Factory Overhead (Overhead Charged)
$869,000
By balance c/d
$557,000
$324,000
$324,000
$1,510,000
$1,510,000
Factory Payroll Payable
Finished Goods (FG)
Particulars
Amount
Particulars
Amount
Particulars
Amount
Particulars
Amount
To Cash
$1,567,000
By WIP
$790,000
To balance b/d
$620,000
By Income Statement (Cost of Goods Sold)
$1,476,999
By Factory Overhead (Indirect Labor)
$777,000
To WIP
$953,000
By balance c/d
$96,001
$1,567,000
$1,567,000
$1,573,000
$1,573,000
Factory Overhead
Income Statement (partial)
Particulars
Amount
Particulars
Amount
Credit Sales
$3,500,000
To other a/c
$12,000
By WIP (Overhead Charged to WIP at 110% of direct labor)
$869,000
Cost of Goods Sold (from finished goods a/c)
$1,476,999
To Raw Material
$80,000
Profit
$2,023,001
To Factory Payroll Payable
$777,000
$869,000
$869,000
2) Journal Entries dated May 31 to record the following production activities during May:
1. Record purchase of raw materials.
Debit Amount ($)
Credit Amount ($)
Raw Material A/c Dr.
$260,000
To Accounts Payable
$260,000
2. Record direct materials used in production.
Debit Amount ($)
Credit Amount ($)
WIP A/c Dr.
$203,000
To Raw Material A/c
$203,000
3. Record indirect materials used in production.
Debit Amount ($)
Credit Amount ($)
Factory Overhead A/c Dr.
$80,000
To Raw Material A/c
$80,000
4. Record direct labor cost incurred, but not yet paid.
Debit Amount ($)
Credit Amount ($)
WIP A/c Dr.
$790,000
To Factory Payroll Payable
$790,000
5. Record indirect labor cost incurred, but not yet paid.
Debit Amount ($)
Credit Amount ($)
Factory Overhead A/c Dr.
$777,000
To Factory Payroll Payable
$777,000
6. Record payment of total factory payroll.
Debit Amount ($)
Credit Amount ($)
Factory Payroll Payable Dr.
$1,567,000
To Cash
$1,567,000
7. Record other overhead costs incurred (credit Other accounts).
Debit Amount ($)
Credit Amount ($)
Factory Overhead A/c Dr.
$12,000
To Other Account
$12,000
8. Record overhead applied at 110% of direct labor cost.
Debit Amount ($)
Credit Amount ($)
WIP A/c Dr.
$869,000
To Factory Overhead
$869,000
9. Record the transfer of completed products from production to finished goods inventory.
Debit Amount ($)
Credit Amount ($)
Finished Goods A/c Dr.
$953,000
To WIP A/c
$953,000
10. Record the sale of finished goods.
Debit Amount ($)
Credit Amount ($)
Cost of Goods Sold
$1,476,999
To Finished Goods A/c
$1,476,999
11. Record cost of goods sold for May.
Debit Amount ($)
Credit Amount ($)
Accounts Receivable A/c Dr.
$3,500,000
To Sales A/c (Cost of Goods Sold)
$3,500,000
Raw Materials (RM)
Work in Process (WIP)
Particulars
Amount
Particulars
Amount
Particulars
Amount
Particulars
Amount
To balance b/d
$64,000
By WIP (Direct Material)
$203,000
To balance b/d
$438,000
By Finished Goods (Completed units transferred)
$953,000
To Accounts Payable
$260,000
BY Factory Overhead (Indirect Material)
$80,000
To RM
$203,000
By balance c/d
$41,000
To Factory Overhead (Overhead Charged)
$869,000
By balance c/d
$557,000
$324,000
$324,000
$1,510,000
$1,510,000
Factory Payroll Payable
Finished Goods (FG)
Particulars
Amount
Particulars
Amount
Particulars
Amount
Particulars
Amount
To Cash
$1,567,000
By WIP
$790,000
To balance b/d
$620,000
By Income Statement (Cost of Goods Sold)
$1,476,999
By Factory Overhead (Indirect Labor)
$777,000
To WIP
$953,000
By balance c/d
$96,001
$1,567,000
$1,567,000
$1,573,000
$1,573,000
Factory Overhead
Income Statement (partial)
Particulars
Amount
Particulars
Amount
Credit Sales
$3,500,000
To other a/c
$12,000
By WIP (Overhead Charged to WIP at 110% of direct labor)
$869,000
Cost of Goods Sold (from finished goods a/c)
$1,476,999
To Raw Material
$80,000
Profit
$2,023,001
To Factory Payroll Payable
$777,000
$869,000
$869,000
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