Question

Journal Entries, T-Accounts, Cost of Goods Manufactured and Sold

During May, the following transactions were completed and reported by Jerico Company:

1. Materials purchased on account, $60,100.
2. Materials issued to production to fill job-order requisitions: direct materials, $50,000; indirect materials, $8,800.
3. Payroll for the month: direct labor, $75,000; indirect labor, $36,000; administrative, $28,000; sales, $19,000.
4. Depreciation on factory plant and equipment, $10,400.
5. Property taxes on the factory accrued during the month, $1,450.
6. Insurance on the factory expired with a credit to the prepaid insurance account, $6,200.
7. Factory utilities, $5,500.
8. Advertising paid with cash, $7,900.
9. Depreciation on office equipment, $800; on sales vehicles, $1,650.
10. Legal fees incurred but not yet paid for preparation of lease agreements, $750.
11. Overhead is charged to production at a rate of $18 per direct labor hour. Records show 4,000 direct labor hours were worked during the month.
12. Cost of jobs completed during the month, $160,000.

The company also reported the following beginning balances in its inventory accounts:

Materials Inventory	$7,500
Work-in-Process Inventory	37,000
Finished Goods Inventory	50,000

Required:

1. Prepare journal entries to record the transactions occurring in May. For a compound transaction, if an amount box does not require an entry, leave it blank.

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.

2. Prepare T-accounts for Materials Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post the entries to the T-account in the same order in which they were journalized.

Materials Inventory
Balance

Work in Process Inventory
Balance

Finished Goods Inventory
Balance

Overhead Control
		Balance

3. Prepare a statement of cost of goods manufactured.

Jerico Company
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 20XX
		$
Overhead:
	$
	$
Manufacturing costs added		$
Cost of goods manufactured		$

4. If the overhead variance is all allocated to cost of goods sold, by how much will cost of goods sold decrease or increase?
    by   $

Answer 1

Ans- Journal Entries

Date	Particulars	Debit ($)	Credit ($)
a.	Raw materials a/c Dr.	60,100
	Accounts payable		601,00
b.	Work in process	133,800
	Direct materials		50,000
	Indirect materials		8,800
	Direct labor		75,000
c.	Manufacturing overhead	36,000
	Indirect labor		36,000
d.	Administrative expenses	28,000
	Accounts Payable		28,000
e.	Accounts receivable	19,000
	Sales		19,000
f.	Manufacturing overhead	10,400
	Depreciation		10,400
g	Property taxes	1,450
	Property taxes payable		1,450
h	Manufacturing overhead	6,200
	Insurance		6,200
i.	Manufacturing overhead	5,500
	Utilities		5,500
j.	Advertising expenses	7,900
	Cash		7,900
k.	Manufacturing overhead	2,450
	Depreciation- Office equipment		800
	Depreciation- Sales vehicles		1,650
l.	Legal fees	750
	Accounts payable		750
m.	Work-in process	72,000
	Manufacturing overhead		72,000

Raw Materials

Opening balance	7,500	Work -in process	50,000
Accounts payable	60,100	Work -in process	8,800
		Balance	8,800
Total	67,600	Total	67,600

Manufacturing Overhead

Indirect labor	36,000	Work- in process	72,000
Depreciation	10,400	Cost of goods sold (Under applied)	49,100
Insurance	6,200
Utilities	5,500
Depreciation- Office equipment	2,450
Depreciation- Sales vehicle	60,550
Total	121,100	Total	121,100

Work- in Process

Opening balance	37,000	Finished goods	160,000
Direct material	50,000	Balance	82,800
Indirect material	8,800
Direct labor	75,000
Manufacturing overhead	72,000
Total	242,800	Total	242,800

Finished Goods

Opening finished goods	50,000	Balance	259,100
Cost of goods manufactured	160,000
Manufacturing overhead	49,100
Total	259,100	Total	259,100

Statement of cost of goods manufactured

Particulars	Amount ($)
Opening work - in process	37,000
Direct material	50,000
Indirect material	8,800
Direct labor	75,000
Manufacturing overhead	72,000
Total	242,800
Less: Goods completed during the month	160,000
Ending work- in process	82,800

Particulars	Amount ($)
Indirect labor	36,000
Depreciation	10,400
Insurance	6,200
Utilities	5,500
Depreciation- Office equipment	2,450
Depreciation- Sales vehicle	60,550
Actual overhead incurred	121,100
Overhead absorbed	-72,000
Under absorbed	49,100

Hence, cost of goods sold increased by $49,100

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