Question

Prepare journal entries to summarize the 2017 transactions.

As your final entry, dispose of the year-end under- or overallocated manufacturing overhead as a write-off to the Cost of Goods Sold (COGS) account. Assume COGS given of $4,020 does not include the write off of overallocated manufacturing overhead. There should be 11 transactions.

The following data (in thousands) pertain to 2017:

 Direct materials and supplies purchased on credit: $800

 Direct materials used: $710

 Indirect materials issued to various production departments: $100

 Direct manufacturing labor: $1,300

 Indirect manufacturing labor incurred by various production departments: $900

 Depreciation on building and manufacturing equipment: $400

 Miscellaneous manufacturing overhead incurred by various production departments: $550 o (Ordinarily, this would be detailed as repairs, photocopying, utilities, etc.)

 Manufacturing overhead allocated at 160% of direct manufacturing labor costs: ?

 Cost of goods manufactured: $4,120

 Revenues: $8,000

 Cost of goods sold (before adjustment for under- or overallocated manufacturing overhead): $4,020

 Inventories, December 31, 2016 (not 2017): o Materials control: $100 o Work-in-process control: $60 o Finished goods control: $500

Answer 1

Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
a.	Raw material inventory				800
	Accounts payable					800
	(for material purchased)
b.	Work in process inventory				710
	Raw material inventory					710
	(for direct material used)
c.	Manufacturing Overheads				100
	Raw material inventory					100
	(for indirect material used)
d.	Work in process inventory				1300
	Wages payable					1300
	(for direct labour incurred)
e.	Manufacturing Overheads				900
	Wages payable					900
	(for indirect labour incurred)
f.	Manufacturing Overheads				400
	Accumulated depreciation					400
	(for depreciation charged)
g.	Manufacturiing Overheads				550
	Accounts payable					550
	(for other manufacturing indirect expenses incurred)
h.	Work in process inventory				2080
	manufacturing overheads (1300*160%)					2080
	(for overheads applied)
i.	Finished goods invnentory				4120
	work in process inventory					4120
	(for cost of goods manufactured and transferered)
j.	Accounts receivable				8000
	Sales revenue					8000
	(for sales made)
k.	Cost of goods sold				4020
	Finished goods ivnentory					4020
l.	Manufacturing overheads				130
	Cost of goods ssold					130
	(for adjusting the overr-applied overheads)
Note: Computation of Under/ Over applied Overheads:
Overheads incurred (100+900+400+550)				1950
Overheads applied (1300*160%)				2080
Over-applied overheads				130