Question

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May Inventories 

Raw materials inventory  $ 58,000 $ 82,000 

Work in process inventory 597,000 568,000

Finished goods inventory Inventory Inventory  421,000 606,000 

The following additional Information describes the company's production activities for May 

Raw materials purchases (on credit) Factory wages cost (paid in cash) Other overhead cost (Other Accounts credited) Materials used 290,000 1,555,000 81,500 Direct Indirect 204,000 62,000 Labor used Direct Indirect 790,000 765,000 Overhead rate as a percent of direct labor Sales (on credit) 115% $ 5,500,000 The predetermined overhead rate was computed at the beginning of the year as 115% of direct labor cost

Answer 1

Solution:

Raw materials (RM)
Particulars	Debit	Credit	Particulars
Beginning Balance, Apr 30	$58,000.00	$62,000.00	Indirect materials
RM Purchases	$290,000.00	$204,000.00	Direct materials
		$82,000.00	Ending Balance, May 31
Total	$348,000.00	$348,000.00	Total

Work In Process (WIP)
Particulars	Debit	Credit	Particulars
Beginning Balance, Apr 30	$421,000.00	$1,726,500.00	Cost of goods manufactured
Direct material	$204,000.00	$597,000.00	Ending Balance, May 31
Direct labor	$790,000.00
Overhead applied (115% of DL Cost)	$908,500.00
Total	$2,323,500.00	$2,323,500.00	Total

Finished Goods
Particulars	Debit	Credit	Particulars
Beginning Balance, Apr 30	$606,000.00	$1,764,500.00	Cost of goods sold
Cost of goods manufactured	$1,726,500.00	$568,000.00	Ending Balance, May 31
Total	$2,332,500.00	$2,332,500.00	Total

Factory Overhead
Particulars	Debit	Credit	Particulars
Indirect materials	$62,000.00	$908,500.00	Overhead applied
Indirect labor	$765,000.00
Other overheads	$81,500.00
Total	$908,500.00	$908,500.00	Total

Factory Wages Payable
Particulars	Debit	Credit	Particulars
Cash	$1,555,000.00	$790,000.00	Work In Process
		$765,000.00	Factory overhead
Total	$1,555,000.00	$1,555,000.00	Total

Income Statement (Partial)
Sales	$5,500,000.00
Cost of goods sold	$1,764,500.00
Gross Profit	$3,735,500.00

Cost of goods transferred = $1,726,500

Cost of goods sold = $1,764,500