Question

The Polaris Company uses a job-order costing system. The following data relate to October, the first month of the company's fiscal year. a. Raw materials purchased on account, $211,000. b. Raw materials issued to production, $189,000 ($151,200 direct materials and $37,800 indirect materials). c. Direct labor cost incurred, $49,000, indirect labor cost incurred, $21,000. d. Depreciation recorded on factory equipment, $105,000. e. Other manufacturing overhead costs incurred during October, $130,000 (credit Accounts Payable). f. The company applies manufacturing overhead cost to production on the basis of $8 per machine-hour. A total of 76,200 machine-hours were recorded for October. g. Production orders costing $513,000 according to their job cost sheets were completed during october and transferred to Finished Goods. h. Production orders that had cost $452,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 40% above cost,

Answer 1

Answer -

Here, before preparing T-accounts for manufacturing overhead and work in process, we need to prepare journal entries for the transactions a through h.

So,

Transaction	Account	Debit	Credit
a.	Raw materials	$211000
	Accounts payable		$211000
b.	Work in process (Direct materials)	$151200
	Manufacturing overhead (Indirect materials)	$37800
	Raw materials		$189000
c.	Work in process (Direct labor)	$49000
	Manufacturing overhead (Indirect labor)	$21000
	Salaries and wages payable		$70000
d.	Manufacturing overhead	$105000
	Accumulated depreciation		$105000
e.	Manufacturing overhead	$130000
	Accounts payable		$130000
f.	Work in process	$609600
	Manufacturing overhead		$609600
g.	Finished goods	$513000
	Work in process		$513000
h(1)	Cost of goods sold	$452000
	Finished goods		$452000
h(2)	Accounts receivable	$632800
	Sales		$632800

Calculation:

f. Applied manufacturing overhead cost to production = 76200 machine-hours * $8 per machine-hour = $609600

h(2). Sales value = Cost of goods sold + (Cost of goods sold * 40%) = $452000 + ($452000 * 40%) = $632800

Now,

From the journal entries we get debit and credit balance for manufacturing overhead and work in process.

Therefore,

1.

Dr.	Manufacturing Overhead		Cr.
Beginning balance	$0	$609600	f.
b.	$37800
c.	$21000
d.	$105000
e.	$130000
Ending balance		$315800

Calculation:

Ending balance = $609600 - ($0 + $37800 + $21000 + $105000 + $130000)

Ending balance = $315800

2.

Dr.	Work in Process		Cr.
Beginning balance	$35000
b.	$151200	$513000	g.
c.	$49000
f.	$609600
Ending balance	$331800

Calculation:

Ending balance = ($35000 + $151200 + $49000 + $609600) - $513000

Ending balance = $331800