Question

Schmeltz Industries organized in January and recorded the following transactions during its first month of operation:

Jan. 5 Purchased materials on account for $800,000.

Jan. 9 Used materials costing $450,000 on job no. 1001.

Jan. 14 Used materials costing $200,000 on job no. 1002.

Jan. 18 Used materials costing $100,000 on job no. 1003.

Jan. 25 Applied the following direct labor costs to jobs: job no. 1001, $3,600; job no.

1002, $5,400; job no. 1003, $1,350. (Direct labor workers earn $18 per hour.)

Jan. 27 Applied manufacturing overhead to all jobs at a rate of $450 per direct labor hour.

Jan. 28 Completed and transferred job no. 1001 and job no. 1002 to the finished

goods warehouse.

Jan. 29 Sold job no. 1001 on account for $725,000.

Jan. 31 Recorded and paid actual January manufacturing overhead costs of $250,000,

cash.

Jan. 31 Closed the Manufacturing Overhead account directly to Cost of Goods Sold.

a. Prepare journal entries for each of the above transactions.

b. Compute the balance of the Cost of Goods Sold account at January 31.

c. Determine the company’s inventory balances at January 31.

d. Was manufacturing overhead in January overapplied, or was it underapplied? Explain.

I'm having trouble with the last part in part A.

Answer 1

Solution:

I am solving the Part A here since you have only the problem in Part A. In case you need Part b, c and d answers, please let me know so that I will provide you the remaining answers also

Part a --

Date	General Journal	Debit	Credit
Jan.5	Raw materials inventory	$800,000
	Accounts Payable		$800,000
	(Being raw material purchased on credti)
Jan.9	Work in Process Inventory	$450,000
	Raw materials inventory		$450,000
	(Raw materials issued to production)
Jan.14	Work in Process Inventory	$200,000
	Raw materials inventory		$200,000
	(Raw materials issued to production)
Jan.18	Work in Process Inventory	$100,000
	Raw materials inventory		$100,000
	(Raw materials issued to production)
Jan.25	Work In Process ($3600 + $5400 + $1350)	$10,350
	Wages Payable		$10,350
	(Direct labor applied to production)
Jan.27	Work in Process (Total Hours 10350 / $18 * Overhead Rate $450 per hour)	$258,750
	Manufacturing Overheads		$258,750
	(Manufacturing overheads applied to production)
Jan.28	Finished Goods Inventory ($543,600 + 340,400)	$884,000
	Work In Process Inventory		$884,000
	(Completed units are transferred from WIP)
Jan.29	Accounts Receivable	$725,000
	Sales Revenue		$725,000
	(Sold job 1001 on account)
	Cost of Goods Sold	$543,600
	Finished Goods Inventory		$543,600
	(Job 1001 sold)
Jan.31	Manufacturing Overhead Costs	$250,000
	Cash		$250,000
	(Manucturing Ovehreads are recorded and paid)
Jan.31	Over Applied manufacturing Overheads (258,750 - 250,000)	$8,750
	Cost of Goods Sold		$8,750
	(Adjusted Over Applied Manufacturing overhead)

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