Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $210,000.
2. Raw materials used in production, $189,000 ($151,200 direct materials and $37,800 indirect materials).
3. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000.
4. Depreciation recorded on factory equipment, $104,000.
5. Other manufacturing overhead costs accrued during October, $130,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $6 per machine-hour. A total of 76,100 machine-hours were used in October.
7. Jobs costing $515,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $452,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 34% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $33,000.

Answer 1

Solution

Polaris Company

1. Journal Entries:

Date	Account Titles	Debit		Credit
1	Raw Materials Inventory	$210,000
	Accounts Payable			$210,000
	(To record purchase of raw materials on account)
2	Work in Process	$151,200
	Manufacturing Overhead	$37,800
	Raw Materials Inventory			$189,000
	(To record raw materials used in production)
3	Work in Process	$49,000
	Manufacturing Overhead	$21,000
	Salaries and Wages Payable			$70,000
	(To record direct and indirect labor cost)
4	Manufacturing Overhead	$104,000
	Accumulated depreciation - Factory equipment			$104,000
	(To record depreciation on factory equipment)
5	Manufacturing Overhead	$130,000
	Accounts Payable			$130,000
	(To record other manufacturing overhead costs incurred)
6	Work in Process		$456,600
	Manufacturing Overhead				$456,600
	(To record manufacturing overhead applied during production; $6 x 76,100)
7	Finished Goods		$515,000
	Work in Process				$515,000
	(To record jobs completed)
8	Cost of Goods Sold		$452,000
	Finished Goods				$452,000
	(To record cost of goods sold)
9	Accounts Receivable		$605,680
	Sales				$605,680
	(To record sale of completed jobs, 452,000 x 134% = 605,680)

T- Accounts

	Manufacturing Overhead
Raw materials inventory	$37,800	Work in process	$456,600
Salaries and wages payable	$21,000
Accumulated Depreciation -Factory equipment	$104,000
Accounts Payable	$130,000
		ending balance	1,63,800

Work in Process
Beg. Balance	$33,000
Raw materials inventory	$151,200	Finished Goods	$515,000
Salaries and wages payable	$49,000
Manufacturing overhead	$456,600
Ending balance	$174,800