Question

Journal Entries, T-Accounts, Cost of Goods Manufactured and Sold

During May, the following transactions were completed and reported by Jerico Company:

1. Materials purchased on account, $60,200.
2. Materials issued to production to fill job-order requisitions: direct materials, $50,000; indirect materials, $8,700.
3. Payroll for the month: direct labor, $75,000; indirect labor, $35,000; administrative, $28,000; sales, $19,000.
4. Depreciation on factory plant and equipment, $10,500.
5. Property taxes on the factory accrued during the month, $1,450.
6. Insurance on the factory expired with a credit to the prepaid insurance account, $6,200.
7. Factory utilities, $5,500.
8. Advertising paid with cash, $7,900.
9. Depreciation on office equipment, $800; on sales vehicles, $1,650.
10. Legal fees incurred but not yet paid for preparation of lease agreements, $750.
11. Overhead is charged to production at a rate of $18 per direct labor hour. Records show 4,000 direct labor hours were worked during the month.
12. Cost of jobs completed during the month, $150,000.

The company also reported the following beginning balances in its inventory accounts:

Materials Inventory	$7,500
Work-in-Process Inventory	37,000
Finished Goods Inventory	50,000

Required:

1. Prepare journal entries to record the transactions occurring in May. For a compound transaction, if an amount box does not require an entry, leave it blank.

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.

2. Prepare T-accounts for Materials Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post the entries to the T-account in the same order in which they were journalized.

Materials Inventory
Balance

Work in Process Inventory
Balance

Finished Goods Inventory
Balance

Overhead Control
		Balance

3. Prepare a statement of cost of goods manufactured.

Jerico Company
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 20XX
		$
Overhead:
	$
	$
Manufacturing costs added		$
Cost of goods manufactured		$

4. If the overhead variance is all allocated to cost of goods sold, by how much will cost of goods sold decrease or increase?
    by   $

Answer 1

1)Journal entry

a.	Material Inventory                  Accounts Payable	60,200	60,200
b.	Work in Process Inventory Overhead Control                   Material Inventory	50000 8700	58700
c.	Work in Process Inventory Overhead Control Adm Expenses Selling Expenses                   Wages and Salaries Payable	75000 35000 28000 19000	157000
d.	Overhead Control                   Accumulated Depreciation – factory	10,500	10,500
e.	Overhead Control                   Property Tax Payable	1450	1450
f.	Overhead Control                   Prepaid Insurance Account	6200	6200
g.	Overhead Control                   Utility Payable	5500	5500
h.	Selling expenses                   Cash	7900	7900
i.	Adm Expenses Selling Expenses                   Accounts Payable	800 1650	2450
j.	Adm Expenses                   Legal fees Payable	750	750
k.	Work in Process Inventory                   Overhead Control (4000*18)	72000	72000
l.	Finished Goods                   Work in Process Inventory	150000	150000

Part 2 -

Prepare T-accounts for Materials Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post all relevant entries to these account

Material Inventory
7200	58700
60200
8700

Work in Process Inventory
37000	150000
50000
75000
72000
84000

Finished Goods Inventory
50000
150000
200000

Overhead Control
8700	72000
35000
10500
1450
6200
5500
	4650

Part 3 -

Prepare a statement of cost of goods manufactured-

Jerio Company

Statement of Cost of Goods manufactured

For the end of the May, XX year

Direct Material used	50000
Direct Labour Used	75000
Overhead Applied	72000
Total Cost of manufacturing	197000
Add : Work in Process inventory beginning	37000
Less : Work in Process inventory ending	(84000)
Total Cost of Goods Manufactured	150000

Part 4 -

If the Overhead Variance is all allocated to cost of goods sold, by how much will cost of goods sold decrease or Increase ?

Decrease By $49,100