Question

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The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

	April 30				May 31
Inventories
Raw materials	$	38,000			$	32,000
Work in process		9,400				19,700
Finished goods		50,000				34,900
Activities and information for May
Raw materials purchases (paid with cash)						186,000
Factory payroll (paid with cash)						100,000
Factory overhead
Indirect materials						14,000
Indirect labor						23,000
Other overhead costs						113,500
Sales (received in cash)						1,300,000
Predetermined overhead rate based on direct labor cost						55	%

1. Direct labor usage.
2. Indirect labor usage.
3. Total payroll paid in cash.

Prepare journal entries for the above transactions for the month of May.

Answer 1

Journal entry for Direct labor usage:

Date	General Ledger	Debit	Credit
May	Work in Process Inventory	100,000
	Factory Payroll payable		100,000

Journal entry for Indirect labor usage:

Date	General Ledger	Debit	Credit
May	Manufacturing Overhead	23,000
	Factory Payroll payable		23,000

Journal entry for payroll paid in cash:

Date	General Ledger	Debit	Credit
May	Factory Payroll payable	123,000
	Cash		123,000