Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $209,000.
2. Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).
3. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000.
4. Depreciation recorded on factory equipment, $106,000.
5. Other manufacturing overhead costs accrued during October, $129,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $6 per machine-hour. A total of 76,200 machine-hours were used in October.
7. Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $447,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 36% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $35,000

Answer 1

Solution 1:

Journal Enteries - Polaris Company
S. No	General Journal	Debit	Credit
a	Raw Material Inventory Dr	$209,000.00
	To Accounts Payable		$209,000.00
	(Raw material purchased on account)
b	Work In Process Dr	$152,000.00
	Manufacturing Overhead Dr	$38,000.00
	To Raw Material Inventory		$190,000.00
	(Being Raw material used in production)
c	Work In Process Dr	$49,000.00
	Manufacturing Overhead Dr	$21,000.00
	To Wages Payable		$70,000.00
	(Being labor cost accrued)
d	Manufacturing overhead Dr	$106,000.00
	To Accumulated depreciation - Factory Equipment		$106,000.00
	(Being depreciation charged on factory equipment)
e	Manufacturing overhead Dr	$129,000.00
	To Accounts Payable		$129,000.00
	(Being other manufacturing overhead cost incurred)
f	Work In Process Dr (76200 * $6)	$457,200.00
	To Manufacturing overhead		$457,200.00
	(Being manufacturing overhead applied to prodcution)
g	Finished Goods Inventory Dr	$511,000.00
	To Work In Process		$511,000.00
	(Being cost of completed goods transferred to finished goods)
h-1	Cost of goods sold Dr	$447,000.00
	To Finished Goods Inventory		$447,000.00
	(Being cost of unit sold transferred to COGS)
h-2	Accounts Receivables Dr ($447,000*136%)	$607,920.00
	To Sales Revenue		$607,920.00
	(To record sales on account)

Solution 2:

Manufacturing Overhead Account
Particulars	Debit	Particulars	Credit
To Raw material inventory	$38,000.00	By Work In Process	$457,200.00
To Wages Payable	$21,000.00
To Accumulated depreciation - Factory Equipment	$106,000.00
To Accounts Payable	$129,000.00
To Ending balance	$163,200.00
Total	$457,200.00	Total	$457,200.00

Work in Process Account
Particulars	Debit	Particulars	Credit
To Beginning Balance	$35,000.00	By Finished goods inventory	$511,000.00
To Raw Material Inventory	$152,000.00	By Ending balance	$182,200.00
To Wages Payable	$49,000.00
To Manufacturing overhead applied	$457,200.00
Total	$693,200.00	Total	$693,200.00