Question

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

1. Purchased $16,960 of materials on account.

2. Issued $16,790 in direct materials to the production department.

3. Issued $1,290 of supplies from the materials inventory.

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

5. Returned $2,020 of the materials issued to production in (2) to the materials inventory.

6. Direct labor employees earned $32,300, which was paid in cash.

7. Purchased miscellaneous items for the manufacturing plant for $17,330 on account.

8. Recognized depreciation on manufacturing plant of $36,200.

9. 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 $435,000. Estimated overhead for the year was $430,650.

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

	Beginning			Ending
Materials Inventory		?		$	12,510
Work-in-Process Inventory		?			10,550
Finished Goods Inventory	$	2,670			6,910
Cost of Goods Sold		?			73,700

Required:

a. Prepare journal entries to record these transactions.

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
430650/435000
99%
TR	General journal				Debit	Credit
1)	Raw materials inventory				16,960
	Accounts payable					16,960
2)	Work in process inventory				16,790
	Raw materials inventory					16,790
3)	manufacturing overhead				1,290
	Raw materials inventory					1,290
4)	Accounts payable				16,960
	cash					16,960
5)	Raw materials inventory				2,020
	work in process inventory					2,020
6)	work in process inventory				32,300
	cash					32,300
7)	manufacturing overhead				17,330
	Accounts payable					17,330
8)	Manufacturing overhead				36,200
	Accumulated depreciation					36,200
9)	work in process inventory				31977
	applied Manufacturing overhead					31,977
Materials inventory
Beg.Bal	11,610				Work in process inventory
1)	16,960	16,790	2)		beg .bal	9,443
5)	2,020	1,290	3)		2)	16,790	2,020	5)
					6)	32,300	77,940	Trfd to finished
					9)	31977		goods
end bal	12,510
					End bal	10,550
Manufacturing overhead control					Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	1,290						31977	9)
7)	17,330
8)	36,200
End bal	54820				end bal		31977
Accounts payable					Cash
Beg.Bal		0			Beg.Bal	0
4)	16,960	16,960	1)				16,960	4)
		17,330	7)				32,300	5)
End bal		17,330			End bal		49,260
Accumulated Depreciation -PP&E					finished goods inventory
Beg.bal		0			Beg bal	2,670
		36,200	8)		goods com	77,940	73,700	Trfd to COGS
End bal		36200			end bal	6,910
cost of goods sold
Beg.Bal	0
Goods comp	73,700
End bal	73700