Question

12. During March, Hart Company incurred the following costs on Job 122 for the manufacture of 200 motors. Original cost accumulation Direct Materials $2,600 Direct Labor 900 Factory Overhead 1,350 Direct costs of reworking 10 units Direct Materials $100 Direct Labor 180 Factory Overhead 270 Assume the rework costs are to be spread over all jobs that go through the production cycle. What is the journal entry needed to record the rework costs? a. Debit - Work in Process 550 Credit - Materials 100 Credit – Payroll 180 Credit – Factory Overhead 270 b. Debit – Materials 100 Debit – Payroll 180 Debit – Factory Overhead 270 Credit - Work in Process 550 c. Debit - Factory Overhead 550 Credit - Materials 100 Credit – Payroll 180 Credit - Factory Overhead 270 d. Debit – Spoilage Goods Inventory 550 Credit - Work in Process 550 13. Listed below are steps of purchasing and receiving materials: 1. The receiving clerk prepares a receiving report 2. Purchase requisitions are prepared to notify the purchasing agent that additional materials are needed 3. The purchase of merchandise is recorded by the accounting department 4. The purchasing agent completes a purchase order In which order would these events typically happen? a. 4, 2, 3,1 b. 2,4,3,1 c. 2, 4, 1,3 d. 4,2,1,3

Answer 1

1)

Rework cost refer to the cost or expense incurred in correcting the defects of product. Rework cost make the product salable item.

If rework costs are to be spread over all jobs, then it is recorded in Manufacturing Overhead Control Account and credited all other costs.

Hence, the correct entry would be:

Debit - Factory Overhead i.e. Control (rework costs) $550

Credit - Material $100

Credt - Payroll $180

Credit - Factory Overhead $270

Hence, the correct option is c.

13)

Steps of purchasing and receiving material:

-- Purchase requisition are prepared to notify the purchasing agent that additional materials are needed

-- The purchasing agent completes a purchase order

-- The receiving clerk prepares a receicing report

-- The purchase of merchandise is recorded by the accounting department

Hence, the correct option is c. 2, 4, 1, 3