Question

The Wayne Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year: manufacturing overhead cost, $220,000; direct materials cost, $160,000. The following transactions took place during the year (all purchases and services were acquired on account):

           

a.   Raw materials purchased, $116,000.

b.   Raw materials requisitioned for use in production (all direct materials), $98,000.

c.   Utility costs incurred in the factory, $15,000.

d.   Salaries and wages incurred as follows:

      Direct labor, $175,000.

      Indirect labor, $70,000.

      Selling and administrative salaries, $125,000.

e.   Advertising costs incurred, $89,000.

f.    Depreciation recorded for the year, $80,000 (80% relates to factory assets and the remainder relates to selling, general, and administrative assets).

g.   Miscellaneous selling, general, and administrative costs incurred, $11,000.

h.   Manufacturing overhead cost was applied to jobs as per company policy.

i.    Cost of goods manufactured for the year, $500,000.

j.    Sales for the year totaled $1,000,000. These goods cost $600,000 to manufacture.

            Required:

            Prepare journal entries (or t accounts) for each of the above transactions. Assume that all transactions with external suppliers, employees, and customers were conducted in cash.

Answer 1

JOURNAL ENTRIES IN THE BOOKS OF WAYNE CO.
S.NO.	PARTICULARS	DEBIT ($)	CREDIT ($)
A	PURCHASE A/C	$1,16,000.00
	TO CASH A/C		$1,16,000.00
	(BEING RAW MATERIAL PURCHASED)
B	NO JOURNAL ENTRY FROM THE POINT OF
	VIEW OF ORGANISATION AS A WHOLE
C	FACTORY EXPENSE A/C	$15,000.00
	TO CASH A/C		$15,000.00
	(BEING FACTORY EXPENSE PAID)
D	DIRECT WAGES A/C	$1,75,000.00
	INDIRECT WAGES A/C	$70,000.00
	SELLING AND ADMIN SALARIES A/C	$1,25,000.00
	TO CASH A/C		$3,70,000.00
	(BEING WAGES AND SALARIES PAID IN CASH)
E	ADVERTISEMENT EXPENSE A/C	$89,000.00
	TO CASH A/C		$89,000.00
	(BEING ADVERTISEMENT EXPENSES PAID)
F	DEPRECIATION EXPENSE A/C	$80,000.00
	TO FACTORY ASSETS		$64,000.00
	TO OTHER ASSETS		$16,000.00
	(BEING DEPRECIATION CHARGED TO ASSETS)
G	MISCELLANEOUS EXPENSES A/C	$11,000.00
	TO CASH A/C		$11,000.00
	(BEING MISC. EXPENSES PAID IN CASH)
H	NO JOURNAL ENTRY FROM THE POINT OF
	VIEW OF ORGANISATION AS A WHOLE
I	NO JOURNAL ENTRY FROM THE POINT OF
	VIEW OF ORGANISATION AS A WHOLE
J	CASH A/C	$10,00,000.00
	TO SALES A/C		$10,00,000.00
	(BEING SALES FOR THE YEAR RECORDED)