[The following information applies to the questions displayed below,] Sierra Com

Question

[The following information applies to the questions displayed below,] Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories Raw materials inventory Work in process inventory Finished goods inventory Beginning Inventory $ 65,000 425,500 633,000 Ending Inventory $ 27,500 583,000 255,001 The following additional information describes the company's production activities for May Raw materials purchases (on credit) Factory payroll cost (paid in cash) Other overhead cost (Other Accounts credited) Materials used $ 260,000 1,552,000 4,000 Direct Indirect $ 215,500 82,000 Labor used Direct Indirect $ 780,000 772,000 110% Overhead rate as a percent of direct labor Sales (on credit) $3,500,000 The predetermined overhead rate was computed at the beginning of the year as 110% of direct labor cost.

Explanation / Answer

Raw materials (RM) Work in process (WIP) Beg bal 425,500 Trsfd 1,696,000 Beg bal 65,000 Direct M 215,500 DM used 215,500 purchases 260,000 indirect mat 82,000 DL used 780,000 OH applied 858000 ending bal 27,500 end bal 583,000 Factory wages payable finished goods (FG) cash 1,552,000 dL used 780,000 beg bal 633,000 COGS 2,073,999 indirect la 772,000 Tsfd 1,696,000 end bal 0 end bal 255,001 Factory overhead income statement (partial) other 4,000 oh applied 858,000 Sales 3,500,000 indirct mat 82,000 cost of goods sold 2,073,999 indirect la 772,000 Gross margin 1,426,001 end bal 0 0 Cost of goods transferred 1,696,000 Cost of goods sold 2,073,999 Journal Entries Date General Journal Debit Credit a) Raw materials inventory 260,000 Accounts payable 260,000 b) Work in process inventory 215,500 Raw materials inventory 215,500 c) Facotry overhead 82,000 Raw materials inventory 82,000 d) Work in process inventory 780,000 Factory wages payable 780,000 e) Facotry overhead 772,000 Factory wages payable 772,000 f) Factory wages payable 1,552,000 cash 1,552,000 g) Factory overhead 4,000 other accounts 4,000 h) Work in process inventory 858000 factory overhead 858000 i) Finished goods inventory 1,696,000 Work in process inventory 1,696,000 j) Cost of goods sold 2,073,999 finished goods invnetory 2,073,999 Accounts receivable 3,500,000 sales 3,500,000

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