Question

Problem 3-6

The Runner Box Company produces a single box used by AirSpeed, an express shipping company. Runner uses a just-in-time system and has almost no inventories of material, work in process, or finished goods. Indeed, the balances are so small that the company treats them as zero for purposes of its accounting reports.

During July, the company produced and shipped 116,000 boxes at a cost of $0.90 per box. The cost consisted of 32 percent material cost, 16 percent labor cost, and 52 percent manufacturing overhead.

Prepare journal entries to record:

a.	The issuance of direct material.
b.	The cost of direct labor (credit wages payable).
c.	The application of manufacturing overhead.
d.	The completion of units in process and their transfer to finished goods.
e.	Cost of goods sold.

(Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
a.
	(To record material used in production)
b.
	(To record labor)
c.
	(To record overhead applied)
d.
	(To record cost of units completed)
e.
	(To record cost of units sold)

Answer 1

Answer:

Journal Entries
Date	Accounts titles and Explanation	Debit ($)	Credit ($)
a	Work in process(116,000*0.90*32%)	33,408
	Raw Material Inventory		33,408
	(To record material used in production)
b	Work in Process	16,704
	Wages Payable (116,000*0.90*16%)		16,704
	(To record labor)
c	Work in process	54,288
	Manufacturing Overhead (116,000*0.90*52%)		54,288
	(To record overhead applied)
d	Finished Goods Inventory(116,000*0.90)	1,04,400
	Work in process		1,04,400
	(To record cost of units completed)
e	Cost of goods sold	1,04,400
	Finished Goods Inventory		1,04,400
	(To record cost of units sold)