Question

PROBLEM 2 BUILDING BLOCKS + JOB COSTING Seaway, Inc. manufactures outboard motors and other marine equipment. The company uses a job-order costing system. Manufacturing overhead is applied on the basis of machine hours. Estimated manufacturing overhead for the year is $1,520,200, and management expects that 69,100 machine hours will be used.

REQUIRED: Prepare journal entries to record the following events, which occurred during May:

e) Labor costs incurred during May totaled $92,500. This amount includes $19,000 of indirect labor costs. Of the total labor costs, $75,000 were paid in cash and the remainder remained unpaid at the end of the month. f) Depreciation on equipment for May totaled $8,500. g) Job number G22, consisting of 60 tachometers, was finished during May. The total cost of the job was $1,200. h) During May, 6,500 machine hours were used. i) Assume actual manufacturing overhead costs totaled $141,000, including amounts recorded in items (a) – (h). The company closed underallocated or overallocated manufacturing overhead. j) Sales in May amounted to $181,000, all of which was on account. Cost of goods sold in May totaled $142,500.

Answer 1

Solution:

Journal Entries - Seaway Inc.
Event	Particulars	Debit	Credit
e	Work In Process Inventory Dr	$73,500.00
	Manufacturing overhead Dr	$19,000.00
	To Cash		$75,000.00
	To Factory Wages Payable		$17,500.00
	(To record labor cost incurred)
f	Manfuacturing overhead Dr	$8,500.00
	To Accumulated depreciation - equipment		$8,500.00
	(To record depreciation on equipment)
g	Finished goods inventory Dr	$1,200.00
	To Work In Process Inventory		$1,200.00
	(Being job finished transferred to finished goods inventory)
h	Work In Process inventory Dr ($1,520,000*6500/69100)	$143,000.00
	To Manufacturing overhead		$143,000.00
	(Being manufacturing overhead applied)
i	Manufacturing overhead Dr	$2,000.00
	To Cost of goods sold		$2,000.00
	(Overallocated overhead closed to COGS)
J1	Accounts receivables Dr	$181,000.00
	To Sales revenue		$181,000.00
	(To record sales on account)
J2	Cost of goods sold Dr	$142,500.00
	To Finished goods inventory		$142,500.00
	(To record COGS)