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Problem 3 - Journal Entries for a Manufacturer Drop Anchor takes special orders to manufacture sailboats for high end customers. Complete the job cost sheets for Drop Anchor for September based on the following information. Prepare journal entries to record the transactions as well as post to the job cost sheets. a. Purchased raw materials on credit, $145,000 b. Materials requisitions: Job 240, 548,000, Job 241.536,000, Job 242, 542,000; Indirect materials were $12,000. c. Time tickets used to charge labor to jobs: Job 240, $40,000; Job 241, 530,000; Job 242, 535,000, indirect laboris $25,000 d. The company incurred the following additional overhead costs: depreciation of factory building, $70,000; depreciation of factory equipment, 560,000; expired factory insurance, 510,000; utilities and maintenance cost of $20,000 were paid in cash. c. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct labor cost. f. Transferred jobs 240 and 242 to Finished Goods Inventory. g. Sold job 240 for $300,000 for cash. h. Closed the under-or over-applied overhead account balance. Job Cast Sheets 242 Total For the current month Direct materials Direct labor Applied overhead Total costs

Answer 1

Job Cost Sheets
	240	241	242	Total
For the current month
Direct materials	$48000	$36000	$42000	$126000
Direct labor	40000	30000	35000	105000
Applied overhead	(40000*1.90)= 76000	(30000*1.90)= 57000	(35000*1.90)= 66500	199500
Total	$164000	$123000	$143500	$430500

Transaction	Account titles and explanation	Debit	Credit
a.	Raw materials inventory	$145000
	Accounts payable		$145000
	(To record raw materials purchased on account)
b.	Work in process inventory	$126000
	Factory overhead	$12000
	Raw materials inventory ($126000+12000)		$138000
	(To record materials used in production)
c.	Work in process inventory	$105000
	Factory overhead	$25000
	Wages payable ($105000+25000)		$130000
	(To record labor cost assigned)
d.	Factory overhead ($70000+60000+10000+20000)	$160000
	Accumulated depreciation- Factory building		$70000
	Accumulated depreciation- Factory equipment		$60000
	Prepaid insurance		$10000
	Cash		$20000
	(To record factory overhead costs incurred)
e.	Work in process inventory($105000*1.90)	$199500
	Factory overhead		$199500
	(To record factory overhead applied)
f.	Finished goods inventory ($126000+105000+199500)	$430500
	Work in process inventory		$430500
	(To record work in process transferred to finished goods inventory)
g.	Cash	$300000
	Sales revenue		$300000
	(To record Job 240 sold for cash)
	Cost of goods sold ($48000+40000+40000*1.90)	$164000
	Finished goods inventory		$164000
	(To record cost of goods sold of Job 240)
h.	Factory overhead	$2500
	Cost of goods sold		$2500
	(To record overapplied overhead)

Actual manufacturing costs= $12000+25000+160000= $197000

Overapplied or underapplied overhead= Actual manufacturing costs-Applied manufacturing costs

= $197000-199500= $2500 overapplied