Question

PROBLEM 2-2 Prepare entries in a job order cost system and partial income statement For the year ended December 31, 2017, the job cost sheets of Cincinnati Products Company contained the following data. Job Manufacturing Direct Direct Total Explanation Number Materials Labor Overhead Costs S 77,800 $24,000 $28,800 7640 Balance 1/1 $25,000 Current year's 30,000 36,000 43,200 109,200 costs 7641 11,000 18,000 Balance 1/1 21,600 50,600 Current year's 48,000 43,000 57,600 148,600 costs Current year's 179,000 7642 58,000 55,000 66,000 costs Other data: Raw materials inventory totaled $15,000 on January 1. During the year, $140,000 of raw materials were purchased on account. Finished goods on January 1 consisted of Job No. 7638 for $87,000 and Job No. 7639 for S92,000 Job No. 7640 and Job No. 7641 were completed during the year Job Nos. 7638, 7639, and 7641 were sold on account for $530,000 Manufacturing overhead incurred on account totaled $120,000 Other manufacturing overhead consisted of indirect materials $14,000, indirect labor $18,000, and depreciation on factory machinery $8,000 Instructions (a) Prove the agreement of Work in Process Inventory with job cost sheets pertaining to unfinished work. (Hint: Use a single T-account for Work in Process Inventory.) Calculate each of the following, then post each to the T-account: (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 Sold. (c) Determine the gross profit to be reported for 2017

Answer 1

a) Work in Process a/c
DEBIT	AMOUNT $	CREDIT	AMOUNT $		Calculations:
OB	128400	Finished Goods	386200		77800+50600	77800+109200+50600+148600
Raw Material	131000	CB	179000		30000+43000+58000
Direct Labor	139000				36000+48000+55000
Manuf. Overhead	166800				43200+57600+66000
Total	565200	Total	565200
b) Manufacturing Overhead a/c
Accounts Payable	120000	WIP	166800
Ind Mat.	14000
Ind. Lab.	18000
Depre.	8000
COGS - Over applied	6800
Total	166800	Total	166800
Adjusting Entry:
Date	Accounts Title	Debit $	Credit $
	Manufacturing overhead	6800
	Cost of Goods Sold		6800
	(being the over applied overhead closed to COGS)
c) Gross Profit 2017:
Sales revenue	530000
Less: COGS	378200				87000+92000+50600+148600
Gross Profit	151800