Question

Littlefield, Inc. produces universal remote controls. Littlefield uses a JIT costing system. One of the company's products has a standard direct materials cost of $8 per unit and a standard conversion cost of $28 per unit. During January 2018, Littlefield produced 625 units and sold 620 units on account at $49 each. It purchased $7,300 of direct materials on account and incurred actual conversion costs totaling $17,000 Read the requirements. Requirement 1. Prepare the summary journal entries for January. (Record debits first, then credits. Exclude explanations from journal entries.) Journalize the purchase of raw materials. Debit Credit Accounts Date Raw and In-Process Inventory Jan. 2018 Accounts Payable Jounalize the actual conversion costs incurred. Debit Credit Accounts Date u Conversion Costs Jan. 2018 Wages Payable, Accumulated Depreciation, etc. cl ab

Answer 1

1	Date	Accounts				Debit	Credit
	Jan. 2018	Raw and in-process inventory				7300
		Accounts payable					7300
		(Purchase of raw materials)
	Jan. 2018	Convesrion costs				17000
		Wages payable,accumulated depreciation etc.					17000
		(Actual coversion costs incurred)
	Jan. 2018	Finished goods inventory				22500
		Raw and in-process inventory			(Note:1)		5000
		Convesrion costs			(Note:2)		17500
		(Production completed)
	Jan. 2018	Accounts receivable			(620*49)	30380
		Sales					30380
		(Sales on account)
	Jan. 2018	Cost of goods sold			(Note:3)	22320
		Finished goods inventory					22320
		(Cost of sales recorded)
	Notes:
	1. raw and in process inventory=Units produced*standard direct material cost=625*8=$ 5000
	2. Conversion cost=Units produced*standard conversion cost=625*28=$ 17500
	3. Cost of goods sold=Units sold*(Standard direct material cost+Standard conversion cost)=620*(8+28)=$ 22320
2			Raw and in process inventory
	Particulars			Debit	Particulars		Credit
	Beg. Balance			110	Transfer to finished goods		5000
	Purchase			7300	End. Balance		2410
				7410			7410
	Jan 31 balance=$ 2410
3			Conversion cost
	Particulars			Debit	Particulars		Credit
	Cost incurred			17000	Transfer to finished goods		17500
	Conversion cost allocated to finished goods are more than the cost incurred.
	Hence, conversion costs are overallocated by $500 (17500-17000)
	Journal entry to adjust the conversion cost account
	Date	Accounts				Debit	Credit
	Jan. 2018	Conversion cost				500
		Cost of goods sold					500