Question

Problem 16-1A Production cost flow and measurement; journal entries LO P1, P2, P3, P4 [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. Beginning Ending Inventory Inventory Raw materials inventory $ 60,000 $ 92,500 Work in process inventory 435,000 515,000 Finished goods inventory 633, 080 605,000 The following additional information describes the company's production activities for May $ 250,000 1,530,000 87,000 Raw materials purchases (on credit) Factory wages cost (paid in cash) Other overhead cost (Other Accounts credited) Materials used Direct Indirect Labor used Direct Indirect Overhead rate as a percent of direct labor Sales (on credit) 157,500 60,000 780,000 750,000 1159 $2,500,000

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Naming convention and format are not available, can be slightly different: e.g. Factory or Manufacturing overhead Solution: Credit Date May.31 Debit 250000 a) 250000 b) May.31 157500 157500 May.31 60000 60000 d) May.31 Journal entries Account title and explaination Raw Material Inventory Accounts Payable (To record the purchase of raw material inventory) Work in process Inventory Raw Material Inventory (To record the application of Direct raw material) Factory overhead Raw Material Inventory (To record the application of Indirect raw material) Work in process Inventory Factory payroll Payable (To record the application of direct labor) Factory overhead Factory payroll Payable (To record the application of indirect labor) Factory payroll Payable Cash (To record the payment of factory payroll) Factory overhead Other accounts (To record the other overhead cost) 780000 780000 e) May.31 750000 750000 f) May.31 1530000 1530000 g) May.31 87000 87000

h) May.31 897000 897000 i) May.31 1754500 1754500 Work in process Inventory (780000*115%) Factory overhead (To record the application of overhead) Finished goods inventory Work in process Inventory (435000+157500+780000+897000-515000) (To record the transfer of completed goods to finished goods inventory) Accounts Receivable Sales Revenue (To record the sales revenue) Cost of goods sold (633000+1754500-605000) Finished goods inventory (To record the cost of goods sold) j) May.31 2500000 2500000 May.31 1782500 1782500