Question

Exercise 15-2

Stine Company uses a job order cost system. On May 1, the company has a balance in Work in Process Inventory of $3,920 and two jobs in process: Job No. 429 $2,600, and Job No. 430 $1,320. During May, a summary of source documents reveals the following.

Labor Time Materials Tickets Job Number Requisition Slips $3,040 $2,300 429 3,430 4,020 30 4,740 $11,800 7,870 $13,600 31 General use 1,310 900 $12,700 $14,910 Stine Company applies manufacturing overhead to jobs at an overhead rate of 62% of direct labor cost. Job No. 429 is completed during the month

Prepare summary journal entries to record (1) the requisition slips, (2) the time tickets, (3) the assignment of manufacturing overhead to jobs, and (4) the completion of Job No. 429. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

Post the entries to Work in Process Inventory, and prove the agreement of the control account with the job cost sheets. (Post entries in the order of journal entries presented in the previous part. Round answers to 0 decimal places, e.g. 5,275.)

Answer 1

Concepts and reason

Job Order Costing:

Job order costing is a type of costing system where costs related to a particular job order are identified and allocated to that particular job in order to find out the total cost related to that particular job. It is used by the companies who work on different jobs which have different production requirement that is job order costing is used when the companies are working on more than one job or one product. In job order costing cost is computed for individual jobs.

Journal entry:

The Journal entries means to keep the records of the accounting transactions in the order in which they occur. The accounting transactions of a business are recorded through journal entries. After recording of the journal entry, the posting is done to different accounts.

Fundamentals

The debit and credit rules that are to be followed to record the journal entry are:

Debit the receiver and Credit the giver: This rule is used when transactions relate to the personal account. When there is receipt of something by a person then the receiver is to be debited and when something is given then the giver is to be credited.

Debit all expenses and losses and Credit all incomes and gains: This rule is used when transactions relate to the nominal accounts. There should be debit of expense or loss when a company incurs expense or loss. There should be credit of income or gain when the company earns income or gain.

Debit what comes in and Credit what goes out: This rule is used when transactions relate to the real account. When the thing or asset is received or purchased by the company then it is to be debited. When the thing or asset is sold by the company then it is to be credited.

Raw materials inventory:

Raw materials are recorded as an asset when it is purchased. Raw materials inventory is an asset, so the purchase of materials which are to be directly used in the process of production is shown as raw materials inventory.

Goods in process inventory:

The materials which is utilized in the manufacturing process but the processing of such materials are not complete is included in the goods in process inventory.

Finished goods inventory:

The goods which are completely manufactured and are to be sold by the company are included in the finished goods inventory.

Direct labor:

The direct labor is considered as a direct cost for a company because the goods are produced or services are provided with the help of employees and workers who are directly associated with the production process.

Manufacturing overhead:

The manufacturing overhead refers to the cost which a company incurs for the manufacturing of its products. Such costs do not include the cost of direct materials and direct labor. It is considered as an indirect cost which is incurred by the company for the purpose of manufacturing operations of the company.

Cash:

Cash is considered as a current asset for the company. It is reported in the assets section of the balance sheet. It is a real account. When there is inflow of cash then there is increase in the balance of the current assets. When there is outflow of cash then there is decrease in the balance of current assets.

1.

Prepare the journal entry for the materials requisition.

Following schedule shows the journal entry for the materials requisition:

2.

Prepare the journal entry for the wages payable.

Following schedule shows the journal entry for the wages payable:

3.

Record the journal entry for the assignment of manufacturing overhead to jobs.

Following schedule shows the journal entry for the assignment of manufacturing overhead to jobs:

Working Note:

Calculate the manufacturing overhead applied.

Calculation of manufacturing overhead applied:

The amount of manufacturing overhead applied is $8,432.

4.

Record the journal entry for the completion of job.

Following schedule shows the journal entry for the completion of job:

Working Note:

Calculate the amount transferred to finished goods inventory.

Calculation of the amount transferred to the finished goods inventory:

The amount transferred to finished goods inventory is $9,366.

Post the entries to prepare the work in process inventory account.

Following schedule shows the work in process inventory account:

Following schedule shows the calculation:

Prepare the job cost sheet.

Following schedule shows job cost sheet:

Following schedule shows the calculation:

Ans: Part 1

Part 2

Part 3

Part 4

The ending balance of the Work in Process inventory is $28,386 and the work in process inventory balance computed in the control account is in agreement with the balance computed in the job cost sheet.