Question

Blue Plate Construction organized in December and recorded the following transactions during its first month of operations.
Dec. 2    Purchased materials on account for $400,000.
Dec. 3    Used direct materials costing $100,000 on job no. 100.
Dec. 9    Used direct materials costing $150,000 on job no. 101.
Dec. 15    Used direct materials costing $30,000 on job no. 102.
Dec. 28    Applied the following direct labor costs to jobs: job no. 100, $9,000; job no. 101, $11,000; job no. 102, $5,000.
Dec. 28    Applied manufacturing overhead to all jobs at a rate of 300% of direct labor dollars.
Dec. 29    Completed and transferred job no. 100 and job no. 101 to the finished goods warehouse.
Dec. 30    Sold job no. 100 on account for $200,000.
Dec. 31    Recorded and paid actual December manufacturing overhead costs of $78,000, cash.
Dec. 31    Closed the Manufacturing Overhead account directly to Cost of Goods Sold.

    Record each of these transactions as illustrated in the Job Order Costing section.

    Compute the amount at which Cost of Goods Sold is reported in the company’s income statement for the month ended December 31.

    Determine the inventory balances reported in the company’s balance sheet dated December 31.

    Was manufacturing overhead in December overapplied, or was it underapplied? Explain.

Answer 1

Job Cost Sheet
		100	101	102
Material		100000	150000	30000
labour		9000	11000	5000
OH @ 300% of DLC		27000	33000	15000
Total c ost\		136000	194000	50000
Status		COGS	FG	WIP
Journal entries:
Date	Accounts title and explanations				Debit $	Credit $
2-Dec	Raw material inventory Dr.				400000
	Accounts payable					400000
3-Dec	WIP Job 100 Dr.				100000
	Raw material inventory					100000
9-Dec	WIP Job 101 Dr.				150000
	Raw material inventory					150000
15-Dec	WIP Job 102 Dr.				30000
	Raw material inventory					30000
28-Dec	WIP Job 100 Dr.				9000
	WIP Job 101 Dr.				11000
	WIP Job 102 Dr.				5000
	Factory wages					25000
28-Dec	WIP Job 100 Dr.				27000
	WIP Job 101 Dr.				33000
	WIP Job 102 Dr.				15000
	Manufacturing overheads					75000
29-Dec	Finished Goods inventory Dr.				330000
	WIP Job 100					136000
	WIP Job 101					194000
30-Dec	Accounts receivable Dr.				200000
	Sales revenue					200000
	Cost of goods sold Dr.				136000
	Finished Goods inventory					136000
31-Dec	Manufacturing overheads Dr.				78000
	Cash account					78000
31-Dec	Cost of goods ssold Dr.				3000
	Maufacturing Overhead					3000
Cost of goods sold in income Statement:
Unadjusted COGS (cost of Job 100)				136000
Add: Under-applied oh				3000
Adjusted COGS to be shown				139000
Inventory Balance:
Raw material:
Purchase		400000
Less: Issued
Job 100	100000
Job 101	150000
Job 102	30000	280000
Raw material inventory		120000
WIP- Job 102		50000
Finished Goods-Job 101		194000
Manufacturing Overheads were Under-applied
Actual Overheads incurred			78000
Less: OH applied			75000
Under-applied OH			3000