Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $211,000.
2. Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).
3. Accrued direct labor cost of $50,000 and indirect labor cost of $21,000.
4. Depreciation recorded on factory equipment, $104,000.
5. Other manufacturing overhead costs accrued during October, $130,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $8 per machine-hour. A total of 76,500 machine-hours were used in October.
7. Jobs costing $510,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $453,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 34% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $36,000.

Answer 1

1) Journal entry

No	General Journal	Debit	Credit
a	Raw material	211000
	Account payable		211000
b	Work in process	152000
	Manufacturing overhead	38000
	Raw material		190000
c	Work in process	50000
	Manufacturing overhead	21000
	Wages payable		71000
d	Manufacturing overhead	104000
	Accumulated depreciation-equipment		104000
e	Manufacturing overhead	130000
	Account payable		130000
f	Work in process (76500*8)	612000
	Manufacturing overhead		612000
g	Finished goods	510000
	Work in process		510000
h	Account receivable (453000*1.34)	607020
	Sales revenue		607020
	Cost of goods sold	453000
	Finished goods		453000

T account

Manufacturing overhead					Work in process
Accumulated depreciation	104000	Work in process	612000		Beg Bal	36000	Finished goods	510000
Raw material	38000				Raw material	152000
Wages payable	21000				Direct labor	50000
Account payable	130000				Manufacturing overhead	612000
		Bal	319000		End bal	340000