Question

Question 2: Production activities of Company B are below: 1. The company purchases 1.600.000 TL worth material during the period. 2. Cost of direct material used in manufacturing is 1.000.000 TL 3. Cost of indirect material used in manufacturing is 200.000 TL 4. Total labor expenses incurred by the company is 2.000.000 TL and it can be grouped as fallows Direct labor 1.600.000 TL Indirect labor 400.000 TL 5. Predetermined manufacturing overhead rate is 150% of direct labor expense. 6. Ending WIP Inventory is 300.000 TL 7. %90 of finished goods are sold 8. Sales revenue earned is 4.000.000 TL Actual Operating and Manufacturing Related Expenses are Below: 9. Depreciation expense of marketing vehicles is 400.000 TL. 10. Depreciation expense of manufacturing machines is 900.000 TL. 11. Repair and Maintenance expense of manufacturing plant is 800.000 TL. 12. Insurance expense of manufacturing plant is 200.000 Material Inventory, 150.000 TL, Jan 1 2015 WIP Inventory, 500.000 TL, Jan 1 2015 Finished Goods Inventory, 800.000 TL, Jan 1 2015 Required: Record the journal entries of transactions for the period.

Answer 1

Dear Student before you go through journal entries

you need to know basic concept.

Accounting in Manufacturing Concern are done in the below mentioned sequence

> Expenses are incurred as they occur in cash or credit

> If they are directly associated with manufacturing of finished goods, it is transferred to WIP

> It is difficult to identify manufacturing overhead that are directly associated with manufacturing of finished goods. Hence it is generally accepted costing principal to charge manufacturing overhead on predetermined basis to cost of finished goods.As in this case it is 150% of Direct Labour.

> Overhead other than Manufacturing are transferred to Profit & Loss A/C , as in this case you will see i have transferred Depreciation in the Statement of P/L A/c.

> Generally inventories are manufactured through out the year, they are transferred to WIP and then Cost of Finished Goods are transferred to Cost of Production. As in this Case total WIP = 5200 and Cost of Production of Finished Goods = 5200 - 300 = 4900

> Total Finished Goods = 4900

Finished Goods = 4900*10 = 490

Cost of Production = 4900-490 = 4410

Gross Loss = 4410-4000 = 410

I have assumed there was NO OPening Stock of Inventory hence actual Gross Loss may be different than i have Calculated above

I hope you will have better understanding after my answer

	Accounts	Debit ( In TL.000)	Credit ( In TL. )
1	Material Purchased A/C	1,600
	Supplier A/C		1,600
	(Being Material Purchased on Credit from Supplier)
2	Work In Progress A/C	1,200
	To Direct Material A/C		1,000
	To Indirect Material A/C		200
	(Being Stock transferred for production)
3	Direct Labour Expenses A/C	1,600
	Indirect Labour Expenses A/C	400
	Cash		2,000
	( Being Expenses Incurred in Cash )
4	Work In Progress A/C	1,600
	To Direct Labour Expenses		1,600
	( BeingDirect Labours are used for production )
5	Work In Progress A/C	2,400
	To Manufacturing Overhead A/C		2,400
	( Being Expenses Charged to WIP)
6	Cost of Production A/C	4,900
	To Work In Production		4,900
	( Being total cost of production of Finished goods are recognised)
h)	Cost of Goods Sold	4,410
	Closing Stock	490
	To Cost Of Production		4,900
9	Depreciation A/C	400
	Marketing Vehicle A/C		400
	( Being Depreciation Charged )
g)	Statement of Profit And Loss A/C	400
	Depreciation A/C		400
	( Being Depreciation Charged to P/L)
10	Depreciation on Manufacturing MAchine A/C	900
	To Plant A/C		400
	( Depreciation Charged to Plant A/C)
11	Repair & Maintenance A/c	800
	Cash		800
			-
	( Being Expenses incurred)
12	Insurance expenses	200
	Cash		800
	( Being Expenses incurred)

13.Debtors A/C Dr 40000

To Sales A/C Cr 40000