Question

Prepare summary journal entries to record the following transactions for a company in its first month of operations.

1. Raw materials purchased on account, $116,000.
2. Direct materials used in production, $46,000. Indirect materials used in production, $20,600.
3. Paid cash for factory payroll, $55,000. Of this total, $41,000 is for direct labor and $14,000 is for indirect labor.
4. Paid cash for other actual overhead costs, $9,250.
5. Applied overhead at the rate of 120% of direct labor cost.
6. Transferred cost of jobs completed to finished goods, $85,600.
7. Sold jobs on account for $123,000 g(2). The jobs had a cost of $85,600 g(1).

Answer 1

a	Raw Materials Inventory	116000
	Accounts Payable		116000
b(1)	Work in Process Inventory	46000
	Raw Materials Inventory		46000
b(2)	Factory overhead	20600
	Raw Materials Inventory		20600
c	Work in process inventory	41000
	Factory overhead	14000
	Cash		55000
d	Factory overhead	9250
	Cash		9250
e	Work in process inventory	49200		=41000*120%
	Factory overhead		49200
f	Finished goods inventory	85600
	Work in Process Inventory		85600
g(1)	Cost of goods sold	85600
	Finished goods inventory		85600
g(2)	Accounts Receivable	123000
	Sales revenue		123000