Question

Re-Tire produces bagged mulch made from recycled tires. Production involves shredding tires and packaging the pieces for sale in the bagging department. All direct materials enter in the first process. The following describes production operations for October. Direct materials used Direct labor used 35% in Shredding; 65% in Bagging. Predetermined overhead rate (based on direct labor) Transferred to Bagging Transferred to finished goods $ 230,000 $157,000 165% $203,000 $596,000 The company's revenue for the month totaled $440,000 from credit sales, and its cost of goods sold for the month is $250,000. Prepare summary journal entries dated October 31 to record its October production activities for (1) direct materials usage, (2) direct labor incurred (3) overhead applied, (4) goods transfer from Shredding to Bagging, (5) goods transfer from Bagging to finished goods, (6) credit sales, and (7) cost of goods sold.

Answer 1

Journal entries
S.no.	Accounts title and explanations			Debit $	Credit $
a.	Work in process-Shredding			2,30,000
	Raw material inventory				2,30,000
	(for direct material used)
b.	Work in process-Shredding	(157000*35%)	54950
	Work in Process-Bagging	(157000*65%)	102050
	Factory wages					157000
	(for direct labour cost applied)
c.	Work in process-Shredding	(54950*165%)	90668
	Work in Process-Bagging	(102050*165%)	168382
	Factory Overheads					259050
	(for overheads applied)
d.	Work in Process-Bagging			2,03,000
	Work in process-Shredding				2,03,000
	(for goods transferred to Bagging)
e.	Finished Goods Inventory			5,96,000
	Work in process-Bagging				5,96,000
	(for goods completed)
f.	Accounts receivable				4,40,000
	Sales revenue					4,40,000
	(for sales made on account)
g.	Cost of goods sold				2,50,000
	Finished Goods Inventory				2,50,000
	(for cost of goods sold)