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	$	230,000
Direct labor used 30% in Shredding; 70% in Bagging.	$	118,000
Predetermined overhead rate (based on direct labor)		165	%
Transferred to Bagging	$	209,500
Transferred to finished goods	$	589,000

The company's revenue for the month totaled $460,000 from credit sales, and its cost of goods sold for the month is $248,000.

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

No.	Account Titles and Explanation	Debit	Credit
1	Work in process - Shredding	$          230,000
	Raw materials inventory		$      230,000
	(To record the direct materials usage)
2	Work in process - Shredding ($118,000*30%)	$            35,400
	Work in process - Bagging ($118,000*70%)	$            82,600
	Factory Wages		$      118,000
	(To record the direct labor incurred)
3	Work in process - Shredding ($35,400*165%)	$            58,410
	Work in process - Bagging ($82,600*165%)	$          136,290
	Factory Overhead		$      194,700
	(To record the overhead applied)
4	Work in process - Bagging	$          209,500
	Work in process - Shredding		$      209,500
	(To record the goods transfer from Shredding to bagging)
5	Finished Goods Inventory	$          589,000
	Work in process - Bagging		$      589,000
	(To record the goods transfer from bagging to finished goods)
6	Accounts Receivable	$          460,000
	Sales Revenue		$      460,000
	(To record the credit sales)
7	Cost of Goods Sold	$          248,000
	Finished Goods Inventory		$      248,000
	(To record the cost of goods sold)