Question

4-24 Product cost flows, journal entries, T-accounts (LO 3, 4) Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor

Answer 1

Journal of Oberita Guitar Company
	Particulars			Debit Amount	Credit Amount
1	Raw Material A/c Dr			$     97,000.00
		To Bank A/c			$       97,000.00
	( Being Raw Material Purchased )
2	Work In Progress A/c Dr			$     70,000.00
	Manufacturing Overhead A/c Dr	To Bank A/c		$     30,000.00
		To Raw Material Account A/c			$     100,000.00
	( Being Raw Material Used for Production as per Requisition )
3	Direct Labour A/c Dr			$   294,000.00
		To Wages Payable A/c			$     294,000.00
	( Being 21,000 Direct Labour used in production @$14 per hour )
4	Indirect Labour A/c Dr			$     65,000.00
		To Wages Payable A/c			$       65,000.00
	( Being 6,500 Indirect Labour used in production @$11 per hour )
5	Insurance, Utilities & property Taxes A/c Dr			$   178,000.00
		To Bank A/c			$     178,000.00
	( Being Insurance, Utilities & property Taxes Paid by Bank )
6	Depreciation A/c Dr			$     40,000.00
		To Assest ( Factory ) A/c			$       40,000.00
	( Being depreciation charges to Factory )
7	Work in Progress A/c Dr			$   315,000.00
		To Manufacturing Overheads A/c			$     315,000.00
	( Manufacturing Overhead expenses being transferred to Work in Progress Account )
8	Finished Goods Inventory A/c Dr			$   665,000.00
		To Work In Progress A/c			$     665,000.00
	( Work in Progress being transferred to Finished Goods Account )
9	Manufacturing Overheads A/c Dr			$       2,000.00
		To Cost of Goods Sold A/c			$        2,000.00
	( Under Applied Manufacturing Over heads being transferred to Cost of Goods Sold Account )
10	Cost of Goods Sold A/c Dr			$   672,000.00
		To Finished Goods A/c			$     672,000.00
	( Finished Goods Inventory being transferred to Cost of Goods Sold Account )
11	Trading P&L A/c Dr			$   670,000.00
		To Cost of Goods Sold A/c			$     670,000.00
	( Cost of Goods Sold being transferred to Trading P&L Account )

Raw Materials Inventory A/c
Date	Description	Debit Amount	Date	Description	Credit Amount
	Opening Balance	$    8,000.00
During the year	To Bank A/c	$ 97,000.00	During the year	By Work In Progress A/c	$ 70,000.00
			During the year	By Manufacturing Overhead A/c	$ 30,000.00
			Year End	Closing Balance	$    5,000.00
	Total	$ 105,000.00		Total	$ 105,000.00
Work in Progress Inventory A/c
Date	Description	Debit Amount	Date	Description	Credit Amount
Year Start	Opening Balance	$ 26,000.00
During the Year	To Direct Labour	$ 294,000.00	During the Year	By Finished Goods Inventory A/c	$ 665,000.00
Year End	To Direct Material A/c	$ 70,000.00
Year End	To Manufacturing Overheads	$ 315,000.00
				By Closing Balance	$ 43,000.00
	Total	$ 705,000.00		Total	$ 708,000.00
Manufacturing Overheads A/c
Date	Description	Debit Amount	Date	Description	Credit Amount
During the Year	To Indirect Labour A/c	$ 65,000.00	Year end	By Work in Progress A/c	$ 315,000.00
During the Year	To Insurance, Utilities & property Taxes A/c	$ 178,000.00		( 300000/20000 =$ 15 per hour
During the Year	To Indirect Material A/c	$ 30,000.00		$15 * 21000 labour hours = $ 315000 )
During the Year	To Description	$ 40,000.00
	To cost of Goods Sold A/c	$    2,000.00
	Total	$ 315,000.00		Total	$ 315,000.00
Finished Goods Inventory A/c
Date	Description	Debit Amount	Date	Description	Credit Amount
	Opening Balance	$ 32,000.00
During the Year	To Work in Progress Account	$ 665,000.00	During the Year	By Cost of Goods Sold A/c	$ 672,000.00
			Year End	Closing Balance	$ 25,000.00
	Total	$ 697,000.00		Total	$ 697,000.00
Cost of Goods Sold A/c
Date	Description	Debit Amount	Date	Description	Credit Amount
Year End	To Finished Goods A/c	$ 672,000.00	Year End	By Manufacturing Overheads A/c	$    2,000.00
			Year End	By Trading Profit and Loss A/c (b/f)	$ 670,000.00
	Total	$ 672,000.00		Total	$ 672,000.00