Question

Of all the times this hard drive could crash, it had to be now,” Sarah cried. “How can I finish the June financial reports without all the information? I knew I should have backed up the disk last night before I left work.” News of the disaster traveled quickly through the office, and people began to stop by her cubicle to offer their help.

Jason was the first to the rescue. “It might not be as bad as you think, Sarah. I have the financial reports from May right here. According to the balance sheet, we had a total inventory of $170,000 at the end of May. And I remember that the Finished Goods Inventory was 60% of that amount.”

“I just finished the inventory counts last night,” Matthew chimed in from across the hall. “According to my tally sheets, we finished June with $38,000 in Direct Materials Inventory, $21,000 in Work in Process Inventory, and $40,000 in Finished Goods Inventory. This was a 25% increase from the balances in Direct Materials Inventory at the end of May. I bet with a little more investigative work, we can get all the numbers you need to complete the reports.”

Kimberly called from Payroll to tell Sarah that the company had paid a total of $23,000 for direct labor during June. Juan, the billing supervisor, e-mailed Sarah that the company had sent out invoices to customers totaling $501,000.

Sarah knew that the overhead rate was 200% of direct labor costs. She also knew that the company priced its product using a 100% markup on the cost of goods sold. Armed with all this information, she sat down to reconstruct the inventory accounts for June.

Using the information available to Sarah, prepare T-accounts to reflect the inventory cost flows for June. (Post entries in order presented in the problem. Round answers to the nearest dollar amount, e.g. 5,275.)

Direct Materials choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose an option                                                                      Bal. enter a debit amount choose an option                                                                      Bal. enter a credit amount Work in Process choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose an option                                                                      Bal. enter a debit amount choose an option                                                                      Bal. enter a credit amount Finished Goods choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a debit amount choose a transaction number                                                                      (1) Beg Bal(2) Beg Bal(3) Beg Bal(4) COGS(5) COG Man(6) DM(7) Pur(8) DL(9) OH enter a credit amount choose an option                                                                      Bal. enter a debit amount choose an option                                                                      Bal. enter a credit amount

Answer 1

T- Accounts Beg Bal Direct Material $30,400 Work in process $110,500) $102,900 Accounts payable End Bal $38,000 $188,500 Beg Bal Direct Material Direct labor Manufacturing overheads End Bal Work in process $37,600 Finished goods $102,900 $23,000 $46,000 $21,000 Finished Goods $102,000 Cost of goods sold $188,500 Beg Bal Work in process $250,500 End Bal $40,000 Working notes: 1) Beginning Finished goods Inventory $102,000 60% of $170,000 $38,000 2) Beginning Direct materials Closing Direct material inventory 25% higher than May end balance So Beginning Inventory will be $30,400 $38,000/125% 3) Beginning Work in process Total Inventory Less: Finished goods inventory Raw material inventory Beginning Work in process $170,000 $102,000 $30,400 $37,600 Balancing number 4) Cost of goods sold Sales Mark up at 50% of sales Cost of goods sold $501,000 $250,500 100% of Cost of goods sold $250,500 5) Cost of goods manufactured Cost of goods sold Add: Closing Inventory of FG Cost of goods available for sale Less: Opening Inventory of FG Cost of goods manufactured $250,500 $40,000 $290,500 $102,000 $188,500 6) Direct material used Total manufacturing cost Less: Direct labor Manufacturing overheads Direct material used $171,900 see working below $23,000 $46,000 200% of Direct labor cost $102,900 Cost of goods manufactured Add: Closing WIP Inventory Total manufacturing cost to account for Less: Beginning WIP Inventory Total manufacturing cost $188,500 $21,000 $209,500 $37,600 as calculated above $171,900 7) Amount of Purchase Direct material used Add: Closing Inventory of Direct material Cost of raw materials available Less: Opening Inventory of Direct material Amount of Purchase $102,900 $38,000 $140,900 $30,400 $110,500 8) Direct labor for the month $23,000 9) Amount of overhead applied $46,000 200% of $23,000