Question

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

1. Raw materials purchased on account, $210,000.
2. Raw materials used in production, $192,000 ($153,600 direct materials and $38,400 indirect materials).
3. Accrued direct labor cost of $48,000 and indirect labor cost of $22,000.
4. Depreciation recorded on factory equipment, $106,000.
5. Other manufacturing overhead costs accrued during October, $129,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $10 per machine-hour. A total of 76,200 machine-hours were used in October.
7. Jobs costing $514,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $451,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 36% 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 $33,000.

Answer 1

Requirement 1: Prepare journal entries as follows:

Item	Account Title and Explanation	Debit	Credit
a	Raw material inventory	$210,000
	Accounts payable		$210,000
	To record raw material purchased on account
b	Work-in-process inventory	$153,600
	Manufacturing overhead	$38,400
	Raw material inventory		$192,000
	To record raw material used.
c	Work-in-process inventory	$48,000
	Manufacturing overhead	$22,000
	Wages payable		$70,000
	To record direct and indirect labor wage payable
d	Manufacturing overhead	$106,000
	Accumulated depreciation - equipment		$106,000
	To record equipment depreciation expense
e	Manufacturing overhead	$129,000
	Accounts payables		$129,000
	To record equipment depreciation expense
f	Work-in-process inventory (76,200 × $10)	$762,000
	Manufacturing overhead allocated		$762,000
	To record manufacturing overhead allocated
g	Finished goods inventory	$514,000
	Work-in-process inventory		$514,000
	To record transfer of finished goods inventory
i	Accounts receivable ($451,000 × 1.36)	$613,360
	Sales revenue		$613,360
	To record sales revenue
	Cost of goods sold	$451,000
	Finished goods inventory		$451,000
	To record cost of goods sold

Requirement 2: Prepare T-accounts as follows:

Work-in-Process Account
Beg. Bal	$33,000	$514,000	(g)
(b)	$153,300
(c)	$48,000
(f)	$762,000
End. Bal	$482,300
Manufacturing Overhead Account
Beg. Bal	$0	$762,000	(f)
(b)	$38,400
(c)	$22,000
(d)	$106,000
(e)	$129,000
		$466,600	End.Bal