Question

Widmer Watercraft’s predetermined overhead rate for year 2015 is 200% of direct labor. Information on the company’s production activities during May 2015 follows.

a.	Purchased raw materials on credit, $240,000.
b.	Materials requisitions record use of the following materials for the month.

Job 136	$	48,500
Job 137		34,000
Job 138		19,400
Job 139		23,400
Job 140		7,200
Total direct materials		132,500
Indirect materials		21,000
Total materials used	$	153,500

c.	Paid $15,500 cash to a computer consultant to reprogram factory equipment.
d.	Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$	12,200
Job 137		10,700
Job 138		37,900
Job 139		39,400
Job 140		3,000
Total direct labor		103,200
Indirect labor		25,500
Total	$	128,700

e.	Applied overhead to Jobs 136, 138, and 139.
f.	Transferred Jobs 136, 138, and 139 to Finished Goods.
g.	Sold Jobs 136 and 138 on credit at a total price of $525,000.
h.	The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Depreciation of factory building	$	69,000
Depreciation of factory equipment		37,000
Expired factory insurance		11,000
Accrued property taxes payable		36,500

i.	Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

2.	Prepare journal entries to record the events and transactions a through i.

3.

Prepare T-accounts for each of the following general ledger accounts, each of which started the month with a zero balance: Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Factory Payroll, Factory Overhead, Cost of Goods Sold. Post the journal entries from Part 2 to the following T-accounts

Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.

Answer 1

		job 136	job 137	job138	job139	job140	total
Materials		48,500	34,000	19,400	23,400	7,200	132,500
labor		12,200	10,700	37,900	39,400	3,000	103,200
overhead		24,400	21400	75800	78800	6000	206,400
total		85,100	66,100	133,100	141,600	16,200	442,100
2)	TR	General Journal				Debit	Credit
	a)	Raw materials inventory				240,000
		Accounts payable					240,000
	b)	Work in process inventory				132,500
		Factory overhead				21,000
		Raw materials inventoy					153,500
	c)	Factory overhead				15,500
		cash					15,500
	d)	Work in process inventory				103,200
		Factory overhead				25,500
		Cash					128,700
	e)	Work in process overhead				179,000
		Factory overhead					179,000
	f)	finished goods inventory				359,800
		Work in process inventory					359,800
	g)	Accounts receivable				525,000
		Sales					525,000
		cost of goods sold				218,200
		finished goods inventory					218,200
	h)	Factory overhead				153,500
		Accumulated depreciation-factory building					69,000
		Accumulated depreciation-factory equipment					37,000
		prepaid insurance					11,000
		property taxes payable					36,500
	i)	work in process inventory				27,400
		Factory overhead					27,400
	T- Accounts
Raw materials inventory					Work in process inventory
a.	240,000				b.	132,500
		153,500	b.		d.	103,200
					e.	179,000
end bal	86,500						359,800	f.
					i.	27400
					bal	82,300
Factory overhead					finished goods inventory
b.	21,000				f.	359,800
c.	15,500						218,200	g.
d.	25,500				bal	141,600
		179,000	e.
h.	153,500
		27,400	i
bal	9,100
cost of goods sold
g.	218,200
end bal	218,200
Report of Job costs
Work in process inventory
job 137			66,100
job 140			16,200
Balance			82,300
finished goods inventory
job 139			141,600
Balance			141,600
cost of goods sold
job 136			85,100
job 138			133,100
balance			218,200