Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October: a. Raw materials purchased on account, $209,000. b. Raw materials used in production, $191,000 ($152,800 direct materials and $38,200 indirect materials). c. Accrued direct labor cost of $49,000 and indirect labor cost of $20,000. d. Depreciation recorded on factory equipment, $106,000. e. Other manufacturing overhead costs accrued during October, $129,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $8 per machine-hour. A total of 76,000 machine-hours were used in October. g. Jobs costing $511,000 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 28% 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 $34,000.

Answer 1

	General Journal	Debit	Credit
a	Raw material inventory	$209,000
	Accounts payable		$209,000
b	Work in process inventory	$152,800
	Manufacturing overhead	38,200
	Raw material inventory		$191,000
c	Work in process inventory	$49,000
	Manufacturing overhead	20,000
	Wages payable		$69,000
d	Manufacturing overhead	$106,000
	Accumulated depreciation-Factory Equipment		$106,000
e	Manufacturing overhead	$129,000
	Accounts payable		$129,000
f	Work in process inventory (76,000*$8)	$608,000
	Manufacturing overhead		$608,000
g	Finished goods inventory	$511,000
	Work in process inventory		$511,000
h	Cost of goods sold	$451,000
	Finished goods inventory		$451,000
	Accounts receivable ($451,000+28%)	$577,280
	Sales		$577,280

2.

Manufacturing Overhead				Work in process inventory
b	$38,200			Beg.Bal.	$34,000
c	20,000			b	152,800	$511,000	g
d	106,000	$608,000	f	c	49,000
e	129,000			f	608,000
		$314,800	End.Bal	End.Bal.	$332,800