Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October: a. Raw materials purchased on account, $209,000. b. Raw materials used in production, $192,000 ($153,600 direct materials and $38,400 indirect materials). c. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000. d. Depreciation recorded on factory equipment, $105,000. e. Other manufacturing overhead costs accrued during October, $130,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $9 per machine-hour. A total of 76.500 machine-hours were used in October. g. Jobs costing $512,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Jobs that had cost $449,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 26% above cost. Required: 1. Prepare journal entries to record the transactions given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $34,000.

Answer 1

1.

Transaction	General Journal	Debit	Credit
a	Raw material	$209,000
	Accounts payable		$209,000
b	Work in process	$153,600
	Manufacturing overhead	38,400
	Raw materials		$192,000
c	Work in process	$49,000
	Manufacturing overhead	21,000
	Wages payable		$70,000
d	Manufacturing overhead	$105,000
	Accumulated depreciation-Factory equipment		$105,000
e	Manufacturing overhead	$130,000
	Accounts payable		$130,000
f	Work in process (76,500*$9)	$688,500
	Manufacturing overhead		$688,500
g	Finished goods	$512,000
	Work in process		$512,000
h	Cost of goods sold	$449,000
	Finished goods		$449,000
	Accounts receivable ($449,000+26%)	$565,740
	Sales		$565,740

2.

Manufacturing Overhead
Beg.bal	$0
b	38,400	$688,500	f
c	21,000
d	105,000
e	130,000
End.bal		$394,100

Work in Process
Beg.bal	$34,000
b	153,600	$512,000	g
c	49,000
f	688,500
End.bal	$413,100