Question

Forest Components makes aircraft parts. The following transactions occurred in July.

1. Purchased $16,860 of materials on account.

2. Issued $16,720 in direct materials to the production department.

3. Issued $1,310 of supplies from the materials inventory.

4. Paid for the materials purchased in transaction (1) using cash.

5. Returned $2,170 of the materials issued to production in (2) to the materials inventory.

6. Direct labor employees earned $31,300, which was paid in cash.

7. Purchased miscellaneous items for the manufacturing plant for $17,390 on account.

8. Recognized depreciation on manufacturing plant of $36,400.

9. Applied manufacturing overhead for the month.

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $435,800. Estimated overhead for the year was $414,010.

The following balances appeared in the inventory accounts of Forest Components for July.

	Beginning			Ending
Materials Inventory		?		$	12,410
Work-in-Process Inventory		?			10,680
Finished Goods Inventory	$	2,660			7,040
Cost of Goods Sold		?			75,100

Required:

Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Materials Inventory Work-In-Process Inventory Beg. bal. ? 0 Beg. bal. ? 0 1. 16,860 16,720 2. 2. 16,720 2,170 5. 5. 2,170 1,310 3. 6. 31,300 ? Transferred to Finished Goods 0 0 9. 29,735 0 End. bal. 1,000 0 0 End. bal. 75,585 Manufacturing Overhead Control Applied Manufacturing Overhead Beg. bal. 0 0 Beg. bal. 0 ? 3. 1,310 0 0 29,735 9. 7. 17,390 0 0 0 8. 36,400 0 End. bal. 29,735 0 0 End. bal. 55,100 Accounts Payable Cash Beg. bal. 0 0 Beg. bal. 0 0 4. 16,860 16,860 1. 0 16,860 4. 0 17,390 7. 0 31,300 6. 0 0 0 0 End. bal. 17,390 End. bal. 48,160 Accumulated Depreciation—Property, Plant, and Equipment Finished Goods Inventory Beg. bal. 0 0 Beg. bal. 2,660 0 0 36,400 8. Goods completed ? 75,100 Transfer to Cost of Goods Sold 0 0 End. bal. 72,440 End. bal. 36,400 Cost of Goods Sold Beg. bal. 0 0 Goods completed 75,100 0 End. bal. 75,100

Answer 1

predeternined overhead rate
estimated overhead/estimated direct labor costs
414010/435800
95%
TR	General journal				Debit	Credit
1)	Raw materials inventory				16,860
	Accounts payable					16,860
2)	Work in process inventory				16,720
	Raw materials inventory					16,720
3)	manufacturing overhead				1,310
	Raw materials inventory					1,310
4)	Accounts payable				16,860
	cash					16,860
5)	Raw materials inventory				2,170
	work in process inventory					2,170
6)	work in process inventory				31,300
	cash					31,300
7)	manufacturing overhead				17,390
	Accounts payable					17,390
8)	Manufacturing overhead				36,400
	Accumulated depreciation					36,400
9)	work in process inventory				29735
	applied Manufacturing overhead					29,735
Materials inventory
Beg.Bal	11,410				Work in process inventory
1)	16,860	16,720	2)		beg .bal	14,575
5)	2,170	1,310	3)		2)	16,720	2,170	5)
					6)	31,300	79,480	Trfd to finished
					9)	29735		goods
end bal	12,410
					End bal	10,680
Manufacturing overhead control					Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	1,310						29735	9)
7)	17,390
8)	36,400
End bal	55100				end bal		29735
Accounts payable					Cash
Beg.Bal		0			Beg.Bal	0
4)	16,860	16,860	1)				16,860	4)
		17,390	7)				31,300	5)
End bal		17,390			End bal		48,160
Accumulated Depreciation -PP&E					finished goods inventory
Beg.bal		0			Beg bal	2,660
		36,400	8)		goods com	79,480	75,100	Trfd to COGS
End bal		36400			end bal	7,040
cost of goods sold
Beg.Bal	0
Goods comp	75,100
End bal	75100