Question

Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost system. For each gallon of output, the following direct manufacturing costs are anticipated:

Direct labor: 2.80 hours at $33.00 per hour	$92.40
Direct materials: 2.80 gallons at $18.00 per gallon	$50.40

During December of the current year, Boron produced a total of 2,580 gallons of output and incurred the following direct manufacturing costs:

Direct labor: 7,100 hours worked @ an average wage rate of $20.30 per hour

Direct materials:

Purchased: 8,000 gallons @ $18.45 per gallon

Used in production: 7,400 gallons

Boron records price variances for materials at the time of purchase.

Required:

Prepare journal entries for the following events and transactions:

1.	Purchase, on credit, of direct materials.
2.	Direct materials issued to production.
3.	Direct labor cost of units completed this period.
4.	Direct manufacturing cost (direct labor plus direct materials) of units completed and transferred to Finished Goods Inventory.
5.	Sale, for $230 per gallon, of 2,400 gallons of output. (Hint: You will need two journal entries here.)

(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to the nearest whole dollar.)

Answer 1

Solution :

Journal Entries - Boron Chemical Company
Event	Particulars	Debit	Credit
1	Direct material inventory Dr (8000*$18)	$144,000.00
	Direct material price variance Dr	$3,600.00
	To Accounts payable (8000*$18.45)		$147,600.00
	(To record purchase of direct material on account)
2	Work in Process Inventory Dr (2580*2.80*$18)	$130,032.00
	Direct material quantity variance Dr	$3,168.00
	To Direct material inventory (7400*$18)		$133,200.00
	(To record use of material into production)
3	Work in process inventory Dr (2580*2.80*$33)	$238,392.00
	To Cash		$144,130.00
	To Direct labor efficiency variance [(2580*2.8 - 7100)*$33]		$4,092.00
	To Direct labor rate variance [($33 - $20.30)*7100]		$90,170.00
	(To record labor cost)
4	Finished goods inventory Dr ($130,032 + $238,392)	$368,424.00
	To Work in process		$368,424.00
	(To record units completed)
5a	Accounts receivables Dr	$552,000.00
	To Sales revenue		$552,000.00
	(To record sales on account)
5b	Cost of goods sold Dr ($368,424*2400/2580)	$342,720.00
	To Finished goods inventory		$342,720.00
	(To recored cost of goods sold)