Question

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

1. Raw materials purchased on account, $209,000.
2. Raw materials used in production, $192,000 ($153,600 direct materials and $38,400 indirect materials).
3. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000.
4. Depreciation recorded on factory equipment, $104,000.
5. Other manufacturing overhead costs accrued during October, $129,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $7 per machine-hour. A total of 76,500 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 $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 32% 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 $37,000.

Answer 1

Part 1

Transaction	General journal	Debit	Credit
a.	Raw materials inventory	209,000
	Accounts payable		209,000
b.	Work in process	153,600
	Manufacturing overhead	38,400
	Raw materials inventory		192,000
c.	Work in process	49,000
	Manufacturing overhead	21,000
	Salaries and wages payable		70,000
d.	Manufacturing overhead	104,000
	Accumulated depreciation		104,000
e.	Manufacturing overhead	129,000
	Accounts payable		129,000
f.	Work in process (76500*7)	535,500
	Manufacturing overhead		535,500
g.	Finished goods	514,000
	Work in process		514,000
h(1).	Cost of goods sold	450,000
	Finished goods		450,000
h(2).	Accounts receivable (450,000)*1.32	594,000
	Sales		594,000

Part 2

Manufacturing overhead
Beg. Bal.		535500	f.
b.	38400
c.	21000
d.	104000
e.	129000
End. Bal.		243100

Work in process
Beg. Bal.	37000	514,000	g
b.	153600
c.	49000
f.	535500
End. Bal.	261100