Question

Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the Cutting process. The following information is available regarding its May inventories:

	Beginning Inventory			Ending Inventory
Work in process inventory—Cutting		43,500			51,500
Work in process inventory—Stitching		63,300			60,500
Finished goods inventory		20,100			8,250

The following additional information describes the company's production activities for May.

Direct materials
Raw materials purchased on credit	$	25,000
Direct materials used—Cutting		21,750
Direct materials used—Stitching		0

Direct labor
Direct labor—Cutting	$	15,600
Direct labor—Stitching		62,400
Total factory payroll paid (in cash)		133,000

Factory Overhead (Actual costs)
Indirect materials used	$	6,000
Indirect labor used		55,000
Other overhead costs		47,000

Factory Overhead Rates
Cutting	(150% of direct materials used			)
Stitching	(120% of direct labor used			)
Sales	$256,000

Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (credit Other Accounts), (h) overhead applied, (i) goods transferred from Cutting to Stitching, (j) goods transferred from Stitching to finished goods, (k) cost of goods sold, and (l) sales.

Answer 1

Date	Accounts Title	Debit	Credit
31-May	Raw Material Inventory	25,000
	Accounts Payable		25,000
	(Being raw material purchased on credit)
31-May	WIP- Cutting	21,750
	Raw Material Inventory		21,750
	(Raw material applied to Cutting process)
31-May	Factory Overhead	6,000
	Raw Material Inventory		6,000
	(indirect material applied to overhead)
31-May	WIP- Cutting	15,600
	WIP-Stitching	62,400
	Payroll payable		78,000
	(being labor applied to production)
31-May	Factory Overhead	55,000
	Payroll payable		55,000
	(being factory payroll applied to overhead)
31-May	Payroll payable	133000
	Cash		133000
	(Being payroll paid)
31-May	Factory Overhead	47,000
	Other accounts		47,000
	(other overhead costs incurred)
31-May	WIP- Cutting (21,750 * 150%)	32625
	WIP-Stitching (62,400 *120%)	74880
	Factory Overhead		107505
	(being overhead applied to production)
31-May	WIP-Stitching	61975
	WIP- Cutting		61975
	(being partially completed goods transferred )
31-May	FG Inventory	202055
	WIP-Stitching		202055
	(finished goods transferred )
31-May	COGS	213905
	FG Inventory		213905
	(being COGS booked for sales)
31-May	Accounts Receivable	256000
	Sales Revenue		256000
	(Being sales booked)

Working Notes:

WIP- Cutting

Debit	Amount	Credit	Amount
ob	43,500	WIP-Stitching	61,975
RM	21,750	cb	51,500
DL	15,600
FO	32,625
Total	1,13,475	Total	1,13,475

WIP-Stitching

Debit	Amount	Credit	Amount
ob	63,300	FG Inventory	2,02,055
WIP Cutting	61975	cb	60,500
DL	62400
FO	74880
Total	2,62,555	Total	262555

Finished goods Inventory

Debit	Amount	Credit	Amount
ob	20100	COGS	213905
WIP-Stitching	202055	cb	8250
Total	222155	Total	222155