Question

Prepare summary journal entries to record the following transactions for a company in its first month of operations.

1. Raw materials purchased on account, $114,000.
2. Direct materials used in production, $45,500. Indirect materials used in production, $20,400.
3. Paid cash for factory payroll, $50,000. Of this total, $37,000 is for direct labor and $13,000 is for indirect labor.
4. Paid cash for other actual overhead costs, $9,125.
5. Applied overhead at the rate of 125% of direct labor cost.
6. Transferred cost of jobs completed to finished goods, $80,500.
7. Sold jobs on account for $115,000. The jobs had a cost of $80,500.

a. Record raw materials purchased on account .

b(1). Record the entry to assign costs of direct materials used.

b(2). Record the entry for indirect materials.

c. Record the usage of direct and indirect labor, paid in cash.

d. Record other actual overhead costs, paid in cash.

e. Record the entry to apply overhead at a rate of 125% of direct labor cost.

f. Record costs of jobs completed.

g(1). Record the cost of the jobs sold.

g(2). Record sales on account.

Answer 1

Transaction	Account Titles and Explanation	Debit ($)	Credit ($)
a.	Raw materials inventory	1,14,000
	Accounts payable		1,14,000
b(1).	Work in process inventory	45,500
	Raw materials inventory		45,500
b(2).	Factory overhead	20,400
	Raw materials inventory		20,400
c.	Work in process inventory	37,000
	Factory overhead	13,000
	Cash		50,000
d.	Factory overhead	9,125
	Cash		9,125
e.	Work in process inventory (37,000*125%)	46,250
	Factory overhead		46,250
f.	Finished goods inventory	80,500
	Work in process inventory		80,500
g(1).	Cost of goods sold	80,500
	Finished goods inventory		80,500
g(2).	Accounts receivable	1,15,000
	Sales		1,15,000