Question

Problem 7-58 (Algo) Tracing Costs in a Job Company (LO 7-2, 3) The following transactions occurred in January at Apex Manufacturing, a custom parts supplier. Apex uses job costing. 1. Purchased $55,600 in materials on account. 2. Issued $3,400 in supplies from the materials inventory to the production department. 3. Paid for the materials purchased in transaction (1). 4. Issued $27,400 in direct materials to the production department. 5. Incurred wage costs of $61,000, which were debited to Payroll, a temporary account. Of this amount, $15,400 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $45,600 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll. 6. Recognized $29,000 in fringe benefit costs, incurred as a result of the wages paid in (5). This $29,000 was debited to Payroll and credited to Fringe Benefits Payable. 7. Analyzed the Payroll account and determined that 60 percent represented direct labor; 30 percent, indirect manufacturing labor; and 10 percent, administrative and marketing costs. 8. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $34,300. 9. Applied overhead on the basis of 160 percent of direct labor costs. 10. Recognized depreciation of $19,150 on manufacturing property, plant, and equipment. Required: a. Prepare journal entries to record these transactions. b. The balances that appeared in the accounts of Apex Manufacturing are shown as follows Ending Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Beginning $58,425 15,225 64,150 - $ 53,600 108,275 Prepare T-accounts to show the flow of costs during the period.

Answer 1

a.	Sl No.	Account titles and explanation					Debit	Credit
	1	Materials inventory					55600
		Accounts payable						55600
		(Purchased materials on account)
	2	Manufacturing overhead					3400
		Materials inventory						3400
		(Supplies issued)
	3	Accounts payable					55600
		Cash						55600
		(Paid for the materials)
	4	Work in process inventory					27400
		Materials inventory						27400
		(Materials issued)
	5	Payroll					61000
		Payroll taxes payable						15400
		Cash						45600
		(Wages cost incurred)
	6	Payroll					29000
		Fringe benefits payable						29000
		(Fringe benefits due)
	7	Work in process inventory			(61000+29000)*60%		54000
		Manufacturing overhead			(61000+29000)*30%		27000
		Administrative salaries			(61000+29000)*10%		9000
		Payroll						90000
		(Assigned payroll expenses)
	8	Manufacturing overhead					34300
		Cash						34300
		(Paid for utilities,power and miscellaneous)
	9	Work in process inventory			(54000*160%)		86400
		Manufacturing overhead						86400
		(Overhead applied)
	10	Manufacturing overhead					19150
		Accumulated depreciation						19150
		(Depreciation recorded)
b.		Materials inventory
	Ref.	Debit	Ref.	Credit
	Bal.	58425	2	3400
	1	55600	4	27400
		114025		30800
		Work in process inventory
	Ref.	Debit	Ref.	Credit
	Bal.	15225	To FG	97725
	4	27400	Bal.	85300
	7	54000
	9	86400
		183025		183025
		Finished goods inventory
	Ref.	Debit	Ref.	Credit
	Bal.	64150	To COGS	108275
	From WIP	97725	Bal.	53600
		161875		161875
		Cost of goods sold
	Ref.	Debit	Ref.	Credit
	From FG	108275	Bal.	108275
	Workings:
	After posting the transactions,do the following
	Cost of goods sold balance=$ 108275
	This will be the only transaction in that account and will be coming from finished goods inventory
	Post $ 108275 in cost of goods sold and finished goods inventory
	Then,balance the FG inventory and balancing figure will be the cost of goods manufactured and transferred from WIP
	Now balance Work in process inventory to find the ending balance