Question

Forest Components makes aircraft parts. The following transactions occurred in July:

1. Purchased $16,940 of materials on account.

2. Issued $16,820 in direct materials to the production department.

3. Issued $1,230 of supplies from the materials inventory.

4. Paid for the materials purchased in transaction (1) using cash.

5. Returned $2,190 of the materials issued to production in (2) to the materials inventory.

6. Direct labor employees earned $32,200, which was paid in cash.

7. Paid $17,200 for miscellaneous items for the manufacturing plant. Accounts Payable was credited.

8. Recognized depreciation on manufacturing plant of $35,800.

9. Applied manufacturing overhead for the month.

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $434,000. Estimated overhead for the year was $394,940.

The following balances appeared in the inventory accounts of Forest Components for July:

	Beginning			Ending
Materials Inventory		?		$	12,420
Work-in-Process Inventory		?			10,600
Finished Goods Inventory	$	2,700			7,000
Cost of Goods Sold		?			73,900

Required:

a. Prepare journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Answer 1

predeternined overhead rate
estimated overhead/estimated direct labor costs
434000/394940
110%
TR	General journal				Debit	Credit
1)	Raw materials inventory				16,940
	Accounts payable					16,940
2)	Work in process inventory				16,820
	Raw materials inventory					16,820
3)	manufacturing overhead				1,230
	Raw materials inventory					1,230
4)	Accounts payable				16,940
	cash					16,940
5)	Raw materials inventory				2,190
	work in process inventory					2,190
6)	work in process inventory				32,200
	cash					32,200
7)	manufacturing overhead				17,200
	Accounts payable					17,200
8)	Manufacturing overhead				35,800
	Accumulated depreciation					35,800
9)	work in process inventory				35420
	applied Manufacturing overhead					35,420
Materials inventory
Beg.Bal	11,340				Work in process inventory
1)	16,940	16,820	2)		beg .bal	6,550
5)	2,190	1,230	3)		2)	16,820	2,190	5)
					6)	32,200	78,200	Trfd to finished
					9)	35420		goods
end bal	12,420
					End bal	10,600
Manufacturing overhead control					Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	1,230						35420	9)
7)	17,200
8)	35,800
End bal	54230				end bal		35420
Accounts payable					Cash
Beg.Bal		0			Beg.Bal	0
4)	16,940	16,940	1)				16,940	4)
		17,200	7)				32,200	5)
End bal		17,200			End bal		49,140
Accumulated Depreciation -PP&E					finished goods inventory
Beg.bal		0			Beg bal	2,700
		35,800	8)		goods com	78,200	73,900	Trfd to COGS
End bal		35800			end bal	7,000
cost of goods sold
Beg.Bal	0
Goods comp	73,900
End bal	73900