Question

Re-Tire produces bagged mulch made from recycled tires. Production involves shredding tires and packaging the pieces for sale in the bagging department. All direct materials enter in the first process. The following describes production operations for October Direct materials used Direct labor used 30% in Shredding: 70% in Bagging. Predetermined overhead rate (based on direct labor) Transferred to Bagging Transferred to finished goods $228,000 $103,000 185% $204,500 $580,000 The company's revenue for the month totaled $430,000 from credit sales, and its cost of goods sold for the month is $258,000. Prepare summary journal entries dated October 31 to record its October production activities for (l) direct materials usage, (2) direct labor incurred (3) overhead applied. (4) goods transfer from Shredding to Bagging, (5) goods transfer from Bagging to finished goods, (6) credit sales and cost of goods sold.

Answer 1

Solution:

S. No	Particulars	Debit	Credit
1	Work in process - Shredding Dr	$2,28,000
	To Raw material Inventory		$2,28,000
2	Work in process - Shredding Dr (103000*30%)	$30,900
	Work in process - bagging Dr (103000*70%)	$72,100
	To Factory Wages		$1,03,000
3	Work in process - Shredding Dr (30900*185%)	$57,165
	Work in process - bagging Dr (72100*185%)	$1,33,385
	To Factory Overhead		$1,90,550
4	Work in process - bagging Dr	$2,04,500
	To Work in process - Shredding		$2,04,500
5	Finished Goods Inventory Dr	$5,80,000
	To Work in process - Bagging		$5,80,000
6	Accounts Receivable Dr	$4,30,000
	To Sales Revenue		$4,30,000
7	Cost of Goods Sold Dr	$2,58,000
	To Finished Goods Inventory		$2,58,000