Question

Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:

1	Direct materials (2.2 lbs. @ $0.85)	$1.87
2	Direct labor (0.80 hr. @ $7.4)	5.92
3	Standard prime cost	$7.79

During the year, 85,750 pounds of material were purchased and used for the changeover activity. There were 35,000 batches produced, with the following actual prime costs:

Direct materials	$59,378
Direct labor (for 27,942 hrs.)	$203,354

	Required:
1.	Prepare a journal entry on Dec. 31 for the purchase of raw materials. Record the transaction as a compound entry.
2.	Prepare a journal entry on Dec. 31 for the issuance of raw materials. Record the transaction as a compound entry.
3.	Prepare a journal entry on Dec. 31 for the addition of labor to Work in Process. Record the transaction as a compound entry.
4.	Prepare a journal entry on Dec. 31 for the closing of variances to Cost of Goods Sold. Record the transaction as a compound entry.

Answer 1

Requirement 1 :
Prepare a journal entry on Dec. 31 for the purchase of raw materials. Record the transaction as a compound entry.
Date	General Journal	Debit	Credit
1	Raw Materials (35000*$1.87)	$    65,450.00
	To accounts payable		$    65,450.00
	(To record the Purchase of raw materials on account)
Requirement 2 :
Prepare a journal entry on Dec. 31 for the issuance of raw materials. Record the transaction as a compound entry.
Date	General Journal	Debit	Credit
2	Work in process	$    65,450.00
	To Raw Materials		$    65,450.00
	(To record the issue of raw materials for production)
Requirement 3 :
Prepare a journal entry on Dec. 31 for the addition of labor to Work in Process. Record the transaction as a compound entry.
Date	General Journal	Debit	Credit
3	Work in process (5.92*35000)	$ 207,200.00
	To wages payable/ cash		$ 207,200.00
	(To record the addition of labout to Work in process)
Requirement 4 :
Prepare a journal entry on Dec. 31 for the closing of variances to Cost of Goods Sold. Record the transaction as a compound entry
Date	General Journal	Debit	Credit
4	Material variance (65450-59378)	$      6,072.00
	Labour variance (207200-203354)	$      3,846.00
	TO cost of goods sold		$      9,918.00
	(To record the closing of variance to cost of good sold)