Question

P20-2B For the year ended December 31, 2012, the job cost shects of Guo Company contained the following data. Job Number Explanation Direct Labor Total Costs 7650 Balance 1/1 Direct Materials S18.000 32,000 Manufacturing Overhead $25,000 45,000 $20.000 36,000 Current year's costs $63.000 113.000 7651 Balance 1/1 Current year's costs 12.000 30,000 16,000 40,000 20.000 50,000 48.000 120,000 7652 Current year's costs 45.000 68,000 85,000 198,000 Other data 1. Raw materials inventory totaled $20,000 on January 1. During the year, 5100,000 of raw materials were purchased on account 2. Finished goods on January 1 consisted of Job No. 7648 for $93,000 and Job No. 7649 for $62,000. 3. Job No. 7650 and Job No. 7651 were completed during the year. 4. Job Nos. 7648.7649, and 7650 were sold on account for S190,000 5. Manufacturing overhead incurred on account totaled $135,000 6. Other manufacturing overhead consisted of indirect materials $12.000, indirect labor $18,000, and depreciation on factory machinery $19,500. Instructions (a) Prove the agreement of Work in Process Inventory with job cest shots pertaining to unfinished work. (Hint: Use a single T account for Work in Process Inventory.) Calculate cach of the following then post each to the Taccount: (1) beginning balance. (2) direct materials. (3) direct labor. (4) manufacturing overhead, and (5) completed jobs. (b) Prepare the adjusting entry for manufacturing overhead, assuming the balance is allocated entirely to cost of goods (c) Determine the gross profit to be reported for 2012

Answer 1

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	Three Jobs are running Job 7650 ,7651 and 7652
	First we need to claculate Opening in process
	Balance of 2 Job (
	Job Number	Details	Total Cost$
	7650	Balance 1/1( Opening )	63,000
	7651	Balance 1/1( Opening )	48,000
	Total	Opening balance	1,11,000
	Derived other cost
	Direct Material
	Job Number	Details	Total Cost$
	7650	current Year cost	32,000
	7651	current Year cost	30,000
	7652	current Year cost	45,000
	Total	Direct material	1,07,000
	Direct Labour
	Job Number	Details	Total Cost$
	7650	current Year cost	36,000
	7651	current Year cost	40,000
	7652	current Year cost	68,000
	Total	Direct Labour	1,44,000
	Manufacturing Overhead
	Job Number	Details	Total Cost$
	7650	current Year cost	45,000
	7651	current Year cost	50,000
	7652	current Year cost	85,000
	Total	Manufacturing Overhead	1,80,000
	Now derived completed work cost in relates to two Job order
	as below :
	Job Number		Amnt($)
	7650	Opening balance	63,000
	7651	Opening balance	48,000
	7650	Direct material	32,000
	7651	Direct material	30,000
	7650	Direct Labour	36,000
	7651	Direct Labour	40,000
	7650	Manufacturing Overhead	45,000
	7651	Manufacturing Overhead	50,000
	Total	Complete Work cost	3,44,000
		T ACCOUNT OF WORK IN PROGRESS
Answer a	WORK IN PROGRESS
	Details		Amnt($)	Details			Amnt($)
	Opening balance		1,11,000	Cost of works completed			3,44,000
	Direct Material		1,07,000	Balance			1,98,000
	Direct Labour		1,44,000
	Manufacturing OH		1,80,000
	Total		5,42,000	Total			5,42,000
	Work in process and unfinished job value $ 198,000

Answer b				Amnt($)	Amnt($)
	Manufactured Oh ( point 5 in the Question)				1,35,000
	Add
	Other manufacturing OH
	Indirect material			12,000
	Indirect Labour			18,000
	Depreciation on Factory Machine			19,500	49,500
	Total Manufacturing OH - Actual				1,84,500
	Total Manufacturing OH - Applied( calculated as above)				1,80,000
	Under applied ( a-b)				4,500
		Journal Entry
		Details	Debit($)	Credit($)
		Cost of goods sold	4,500
		Manufacturing OH		4,500	( As above)

Answer c
	Calculate Gross profit
		Amnt($)	Amnt($)
	Sales		4,90,000
	Less
	Cost of finished goods
	Job 7648	93000
	Job 7649	62000	1,55,000
	Job 7651	Open Bal - $48000
	*( completed Job )	Material + Labour + Manfg OH- $120000	1,72,500
		Add - Under applied OH -$4500
		Gross Profit	1,62,500