Question

Forest Components makes aircraft parts. The following transactions occurred in July:

 

Purchased $16,980 of materials on account.

Issued $16,700 in direct materials to the production department.

Issued $1,280 of supplies from the materials inventory.

Paid for the materials purchased in transaction (1) using cash.

Returned $2,000 of the materials issued to production in (2) to the materials inventory.

Direct labor employees earned $32,900, which was paid in cash.

Paid $17,330 for miscellaneous items for the manufacturing plant. Accounts Payable was credited.

Recognized depreciation on manufacturing plant of $35,600.

Applied manufacturing overhead for the month.

 

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $434,400. Estimated overhead for the year was $417,024.

The following balances appeared in the inventory accounts of Forest Components for July:
 

 BeginningEndingMaterials Inventory ? $12,590Work-in-Process Inventory ?  10,550Finished Goods Inventory$2,730  6,900Cost of Goods Sold ?  75,000

 

Required:

a. Prepare journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

 

Answer 1

predeternined overhead rate
estimated overhead/estimated direct labor costs
417024/434400
96%
TR	General journal				Debit	Credit
1)	Raw materials inventory				16,980
	Accounts payable					16,980
2)	Work in process inventory				16,700
	Raw materials inventory					16,700
3)	manufacturing overhead				1,280
	Raw materials inventory					1,280
4)	Accounts payable				16,980
	cash					16,980
5)	Raw materials inventory				2,000
	work in process inventory					2,000
6)	work in process inventory				32,900
	cash					32,900
7)	manufacturing overhead				17,330
	Accounts payable					17,330
8)	Manufacturing overhead				35,600
	Accumulated depreciation					35,600
9)	work in process inventory				31584
	applied Manufacturing overhead					31,584
	(32900*96%)
Materials inventory
Beg.Bal	11,590				Work in process inventory
1)	16,980	16,700	2)		beg .bal	10,536
5)	2,000	1,280	3)		2)	16,700	2,000	5)
					6)	32,900	79,170	Trfd to finished
					9)	31584		goods
end bal	12,590
					End bal	10,550
Manufacturing overhead control					Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	1,280						31584	9)
7)	17,330
8)	35,600
End bal	54210				end bal		31584
Accounts payable					Cash
Beg.Bal		0			Beg.Bal	0
4)	16,980	16,980	1)				16,980	4)
		17,330	7)				32,900	6)
End bal		17,330			End bal		49,880
Accumulated Depreciation -PP&E					finished goods inventory
Beg.bal		0			Beg bal	2,730
		35,600	8)		goods com	79,170	75,000	Trfd to COGS
End bal		35600			end bal	6,900
cost of goods sold
Beg.Bal	0
Goods comp	75,000
End bal	75000