Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October: a. Raw materials purchased on account, $210,000. b. Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials) c. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000. d. Depreciation recorded on factory equipment, $105,000. e. Other manufacturing overhead costs accrued during October, $130,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $7 per machine-hour. A total of 76,400 machine-hours were used in October g. Jobs costing $515,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Jobs that had cost $451,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 34% 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 $36,000. Complete this question by entering your answers in the tabs below Required 1 Required 2

Answer 1

Solution:

	Particulars	Debit	Credit
a	Raw Materials	210,000
	Accounts Payable		210,000
b	Work in Process	152,000
	Manufacturing Overhead	38,000
	Raw Materials		190,000
c	Work in Process	49,000
	Manufacturing Overhead	21,000
	Salaries and Wages Payable		70,000
d	Manufacturing Overhead	105,000
	Accumulated Depreciation		105,000
e	Manufacturing Overhead	130,000
	Accounts Payable		130,000
f	Work in Process	534,800
	Manufacturing Overhead (76,400 * 7)		534,800
g	Finished Goods	515,000
	Work in Process		515,000
h	Cost of Goods Sold	451,000
	Finished Goods		451,000
	Accounts Receivable	604,340
	Sales (451,000*1.34)		604,340

Manufacturing Overhead
(b) 38,000	(f) 534,800
(c ) 21,000
(d) 105,000
(e ) 130,000
	240,800 (over-applied)

Work in Process
Bal. 36,000	(g) 515,000
(b) 152,000
(c ) 49,000
(f) 534,800
Balance 256,800