Question

Can you please help me with the general entries for the listed accounts? I have attached Background information, and the questions for listed journal entries.

63% of the invoice reflects factory use and the other 37% reflects administrative activities. 20 The company declares and pays a cash dividend of $.65 per share. 22 The first note payment of $1,909 is made to the First Bank of Huntsville, which includes $750 in interest. (Interest = (180,000*.05)/12)) Employees are paid monthly on the 5th of every month. The company accrues the payroll for the month of January, which will be paid on February 5th. The payroll includes the sales and administrative staff that worked a total of 118 hours and earns $11.75 per hour, the factory maintenance worker that worked a total of 108 hours and earns $11.50 per hour, the production supervisor earns $800 a week (assume an even four weeks was worked). Ignore all related payroll taxes. In addition, the following hours were incurred by assembly line workers based on the production time cards for each job: Job Hours 22 85 140 175 77 Rate $11.50 $11.50 $11.50 $11.50 $11.50 29 Apply factory overhead to all jobs (14, 15, 16, 17, & 18). Overhead is allocated based on direct labor costs. Budgeted overhead costs for the year were estimated to be $115,300. Bearkat estimates that direct labor costs will amount to $82,357 for the year. Jobs 14, 15, and 17 were completed and transferred to the warehouse. 29 Sold all bikes from Job 14 and Job 15, and 9 bicycles from Job 17 for cash. Ignore sales tax. 30 Job 16 was completed and transferred to the warehouse.

Answer 1

As per the given data it appears that the entity has been following integral system of cost accounting, where in both financial data and cost data are recorded in the same set of books instead of maintaining two sets of books for each record.

(1)

Sl.No.	Particulars	LFno.	Debit	Credit
1.	Dividend Payable a/c Dr To Cash a/c (Being Dividend paid in cash)[13000shares*$0.65]		$8450	$8450

(2)

Sl.no.	Particulars	LF no.	Debit	Credit
1.	Interest a/c Dr 5% Bond a/c [1909-750]     Dr To cash a/c (Being note installment paid)		$750 $1159	$1909

(3)

Sl.no.	Particulars	LF no.	Debit	Credit
1.	Job 14 WIP a/c[22hrs*$11.5] Dr Job 15 WIP a/c[85hrs*$11.5] Dr Job 16 WIP a/c[140hrs*$11.5] Dr Job 17 WIP a/c[175hrs*$11.5]   Dr Job 18 WIP a/c[77hrs*$11.5] Dr WIP a/c[((108hrs*5)-499)=41hrs*$11.5+$800*4w] Dr To cash a/c (Being wages paid)		$253 $977.5 $1610 $2012.5 $885.5 $3671.5	$9410

It is assumed that the production supervisor salary is directly linked to production process, so his salary $800*4weeks=$3200, is taken as WIP value

Sl.no.	Particulars	LF no.	Debit	Credit
1.	Cost of Sales a/c[118hrs*$11.75] Dr To Cash A/c ( Being wages paid to sales and administrative staff)		$1386.5	$1386.5

(4) Calculation of Factory Overhead

Particulars	Job14	Job15	Job16	Job17	Job18
1.Labor Cost	$253	$977.5	$1610	$2012.5	$885.5
2.Absorbed Overheads(1*1.4times)	$354.2	$1368.5	$2254	$2817.5	$1239.7
3.Total(1+2)	$607.2	$2346	$3864	$4830	$$2125.2

Overhead Absorption rate =$115300/82357=1.4 times labor cost

(5)

Sl.no.	Particulars	LF no.	Debit	Credit
1.	Job 14 Finished Goods a/c Dr Job 15 Finished Goods a/c Dr Job 17 Finished Goods a/c Dr ToJob 14 WIP a/c ToJob 15 WIP a/c ToJob 17 WIP a/c To Factory Overheadsa/c(of JOb14,15,17)		$607.2 $2346 $4830	$253 $977.5 $2012.5 $4540.2