Question

Step #3: Now, enter the transactions and adjustments for January. While the computer will post the transactions to the accounts in the general ledger, you should use the job cost cards as necessary. When you’ve entered all of the transactions, print your income statement and balance sheet.

1/3       Received $10,000 from customers paying on account.

1/5       Purchased raw materials on account from Smith Co. for $115,000.

1/12     Requisitioned raw materials from the warehouse for Job #107 – Total $25,000.

1/16     Made a partial payment of $50,000 on the materials purchased on January 5 and issued a 60-day, 6% note payable for the balance.

1/18     Requisitioned raw materials from the warehouse for Job #108 – Total $50,000.

1/31     Direct labor for the month was used as follows:

                        Job #107 -- $36,000

                        Job #108 -- $70,000

            The direct labor employees were paid in cash (no withholdings).

1/31     Paid $55,000 for Indirect Labor. (No withholdings.)

1/31     Paid administrative salaries for the month of $3,500 and sales salaries of $1,500. (No withholdings.)

1/31     Received and paid the utility bill of $1,750. The company determined that $1,400 related to the factory and $350 to selling and administrative activities.

1/31     Estimated property taxes for the month at $800. Allocate $650 to the factory and $150 to selling and administrative activities.

1/31     Prepare the adjusting entry to accrue interest on the 1/16 note to Smith Company.

1/31     Prepare adjusting entries for depreciation for one month. Use straight-line depreciation and no salvage value.

                        Factory Building      40-year life

                        Factory Machinery   20-year life

                        Office Building        20-year life

                        Office Equipment    10-year life

1/31     Factory overhead is applied to production at 50% of direct labor dollars. Prepare the entry.

1/31     Job #107 is complete. Prepare the necessary entry.

1/31     The remainder of Job#106 and 1,800 units of Job #107 are sold for cash of $195,000. Prepare the necessary entry (or entries).

1/31     If there is any over or underapplied manufacturing overhead, close the amount into Cost of Goods Sold. Hint – view the Manufacturing Overhead account in the General Ledger.

Don’t forget to complete the questions and the Schedule of Cost of Goods Manufactured & Sold that appear at the end of this document.

The following Job Cost Sheets are for your benefit only and do not need to be submitted.

Job Cost Sheet Job Order No. 106    Type:   A gadgets      Units: 2,440   Begun: 11/1 Completed: 11/30
	Direct Labor	Overhead
$39,500	$55,000	$27,500
Cost Summary Direct materials___$39,500____ Cost per unit    $50 (122,000/2440) Direct labor      ____55,000____ Units sold: ___2000_______ Overhead           _      27,500___ Units remaining      440 Total                ____$122,000_____

Job Cost Sheet Job Order No. 107    Type:   ______ Units: 2000         Begun: 11/1 Completed: ___
Direct Materials	Direct Labor	Applied Overhead
$5,400	$6,400	$3,200
Cost Summary Direct materials__________ Cost per unit    Direct labor      __________ Units sold: ________ Overhead           ________ Units remaining   Total                ________________

Job Cost Sheet Job Order No. 108
Direct Materials	Direct Labor	Applied Overhead
Cost Summary Direct materials________________ Cost per unit Direct labor      ________________ Units sold: __________ Overhead           _______________ Units remaining Total                ________________

Questions for Job Order Problem

Answer the following:

1. In January you purchased $115,000 of raw materials. How much, in dollars, of raw materials were used in production during January?

2. Give one reason why a company would use a predetermined overhead application rate rather than apply the actual amount of factory overhead incurred?

3. You were asked to close the over or underapplied overhead into the cost of goods sold. Explain another way to dispose of the under or overapplied overhead.

4. Create a Statement of the Cost of Goods Manufactured and Sold for this company for January. (See Chapters 14 and 15 for examples. You may submit this using Excel rather than typing in word format.)

Answer 1

Date	Account Titles	Debit ($)	Credit ($)
3-Jan	Cash	10,000
	Accounts Receivable		10,000
5-Jan	Raw Materials Inventory	115,000
	Accounts Payable		115,000
12-Jan	Goods in Process Inventory	25,000
	Raw Materials Inventory		25,000
16-Jan	Accounts Payable	115,000
	Cash		50,000
	Notes Payable		65,000
18-Jan	Goods in Process Inventory	50,000
	Raw Materials Inventory		50,000
31-Jan	Goods in Process Inventory	106,000
	Cash		106,000
31-Jan	Factory Overhead	55,000
	Cash		55,000
31-Jan	Administrative Salaries Expense	3,500
	Sales Salaries Expense	1,500
	Cash		5,000
31-Jan	Factory Overhead	1,400
	Utilities Expense	350
	Cash		1,750
31-Jan	Factory Overhead	650
	Property Tax Expense	150
	Property Taxes Payable		800
31-Jan	Interest Expense ( $ 65,000 x 6 % x 15 / 360)	162.5
	Interest Payable		162.5
31-Jan	Factory Overhead	1,500
	Depreciation Expense	4,200
	Accumulated Depreciation: Factory Building		1,000
	Accumulated Depreciation : Factory Machinery		500
	Accumulated Depreciation : Office Building		4,000
	Accumulated Depreciation : Office Equipment		200
31-Jan	Goods in Process Inventory	53,000
	Factory Overhead		53,000
31-Jan	Finished Goods Inventory	94,000
	Goods in Process Inventory		94,000
31-Jan	Cash	195,000
	Sales		195,000
31-Jan	Cost of Goods Sold	106,600
	Finished Goods Inventory		106,600
31-Jan	Cost of Goods Sold	5,550
	Factory Overhead		5,550

1. $ 75,000 of raw materials were used in production during January.

2. A predetermined overhead rate aids in drawing up a quotation for a job. Unless a job is complete, don't know the actual amount of overheads incurred.

3. The under-applied overhead could also have been closed out by proportionate debits to Goods in Process Inventory, Finished Goods Inventory and Cost of Goods Sold.

4. Schedule of Cost of Goods Manufactured and Sold

Raw materials used	$75,000
Direct labor used	106,000
Factory overhead applied	53,000
Total manufacturing costs	234,000
Add: Beginning goods in process inventory	15,000
Total cost of goods in process	249,000
Less: Ending work in process inventory	155,000
Cost of Goods Manufactured	94,000
Add: Finished goods inventory	22,000
Cost of goods available for sale	116,000
Less: Ending finished goods inventory	9,400
Cost of Goods Sold ( Unadjusted )	106,600
Factory overhead underapplied	5,550
Adjusted Cost of Goods Sold	112,150