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, $189,000 ($151,200 direct materials and $37,800 indirect materials).
3. Accrued direct labor cost of $50,000 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 $9 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 $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 24% 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 $34,000.

Answer 1

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Raw material inventory		209000
	Accounts payable				209000
	(for material purchased)
b.	Work in process inventory		151200
	Manufacturing overheads		37800
	Raw material inventory			189000
	(for material used)
c.	Work in process inventory		50000
	Manufacturing overheads		21000
	Factory wages payable			71000
	(for wages accrued)
d.	Manufacturing overheads		1,04,000
	Accumulated dep				1,04,000
	(for depreciation charged)
e.	Manufacturing overheads		129000
	Accounts payable				129000
	(for overheads incurred)
f.	Work in process inventory		685800
	Manufacturing oh (76200 MH @9)		685800
	(for overheads applied)
g.	Finished goods inventory		5,14,000
	Work in process inventory			5,14,000
	(for goods completd)
h.	Cost of goods sold			4,50,000
	Finished goods inventory			4,50,000
	(for cost of goods sold)
	Accounts recievable (450000+24%)	558000
	Sales revenue				558000
	(for sales made on account)
Manufacturing Overheads
Raw material inventory	37800	Work in process inventory	685800
factory wages payable	21000
Accumulated dep		1,04,000
Accounts payable		129000
				Ending balance		394000
Work in Process Inventory
Raw material inventory	151200	Finished goods inventory	514000
Factory wages payable	50000
Manufacturing overheads	685800
Ending balance		373000