Question

Eagle Inc. uses a job-order costing system. The company’s inventory balances on April 1, the start of its fiscal year, were as follows:

Raw Materials Inventory	$469,325
Work in Process Inventory	$255,100
Finished Goods Inventory	$181,256

During the year, the following transactions were completed:

1. Raw materials were purchased on account, $267,345.
2. Raw materials were issued from the storeroom for use in production, $238,000 (40% indirect and 60% direct).
3. Employee salaries and wages were accrued as follows: direct labor, $229,600; indirect labor, $118,750; and selling and administrative salaries, $55,460.
4. Utility costs for the factory were $97,323.
5. Depreciation was recorded, $162,800 (70% related to factory assets, and 30% related to selling and administrative assets).
6. Manufacturing overhead was applied to jobs at the rate of 120% of direct labor cost.
7. Goods that cost $682,700 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
8. Sales for the year totaled $1,164,300 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $625,317.

Submit your assignment as an Excel spreadsheet with each tab labeled by item number. Demonstrate the following:

1. Prepare the journal entries to record the transactions for the year.
2. Prepare the T-accounts to calculate end of period balances for raw materials inventory, work in process inventory, finished goods inventory, manufacturing overhead, and cost of goods sold.
3. Prepare a journal entry to close the under or over-applied manufacturing overhead balance to cost of goods sold.

Answer 1

Journal Entries Account Titles and Explanation Debit No Credit Raw Materials Invento Accounts payable (to record purchase of invento 267,345 267,345 Work in Process Inventory (238,000 x 60% Manufacturing Overhead (238,000 x 40% Raw Materials Invento (to record issue of invento 142,800 95,200 238,000 Work in Process Invento Manufacturing Overhead Selling and administrative salaries Salaries and Wages payable (to record Employee salaries and wages accrued) 229,600 118,750 55,460 403,810 97,323 Manufacturing Overhead Accounts payable (to record utilities cost incurred 97,323 Manufacturing Overhead (162.800 x 70% Depreciation expense (162,800 x 30% Accumulated Depreciation (to record depreciation expense) 113,960 48,840 162,800

Work in Process Inventory (229,600 x 120%) 275,520 275,520 (to record manufacturing overhead applied) Finished Goods Inventory Work in process Inventory to record completed cost transferred) 682,700 682,700 Sales Accounts receivable (to record sales on credit) 1,164,300 1,164,300 h2 Cost of goods sold Finished Goods Inventory (to record cost of good sold) 625,317 625,317

Raw Mateirals 469,325 267,345 498,670 Manufacturing Overhead Beg.Bal 95,200 118,750 97,323 113,960 149,713 275,520 238,000 End.Bal Work in Process Invento Bal 255,100 142,800 229,600 275,520 220,320 Beg.Bal 682,700 Cost of goods sold h2 625,317 End.Bal Bal 625,317 Finished Goods Invento Beg.Bal 181,256 682,700 238,639 h2 625,317 End.Bal

Journal Entry to close the Manufacturing Overhead Total Manufacturing Overhead Incurred Indirect Material Indirect Labor Utility Cost Factory Depreciation 95,200 118,750 97,323 113,960 425,233 (275,520) 149,713 Less: Applied Overhead Under applied Overhead Account Titles and Explanation Debit No Credit Cost of goods sold Manufacturing Overhead (to close underapplied overhead) 1 149,713 149,713