Question

equired information

Problem 20-1A Production cost flow and measurement; journal entries LO P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories

	Beginning Inventory	Ending Inventory
Raw materials inventory	$55,000	$34,000
Work in process inventory	417,500	577,000
Finished goods inventory	601,000	541,000

The following additional information describes the company's production activities for May.

Raw materials purchases (on credit)	$270,000
Factory wages cost (paid in cash)	1,575,000
Other overhead cost (Other Accounts credited)	87,000
Materials used
Direct	$215,000
Indirect	76,000
Labor used
Direct	$790,000
Indirect	785,000
Overhead rate as a percent of direct labor	120%
Sales (on credit)	$4,500,000

The predetermined overhead rate was computed at the beginning of the year as 120% of direct labor cost.

rev: 09_05_2017_QC_CS-97362

Problem 20-1A Part 1

Required:
1. Compute the cost of products transferred from production to finished goods and cost of goods sold.

2. Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (h) overhead applied, (i) goods transferred from production to finished goods, and (j) sale of finished goods.

Answer 1

Raw materials (RM)					Work in process (WIP)
					Beg bal	417,500	Trsfd	1,793,500
Beg bal	55,000	Direct M	215,000		DM used	215,000
purchases	270,000	indirect mat	76,000		DL used	790,000
					OH applied	948000
ending bal	34,000
					end bal	577,000
Factory wages payable					finished goods (FG)
cash	1,575,000	dL used	790,000		beg bal	601,000	COGS	1,853,500
		indirect la	785,000		Tsfd	1,793,500
end bal	0				end bal	541,000
Factory overhead					income statement (partial)
other	87,000	oh applied	948,000		Sales			4,500,000
indirct mat	76,000				cost of goods sold			1,853,500
indirect la	785,000				Gross margin			2,646,500
end bal	0	0
					Cost of goods transferred			1,793,500
					Cost of goods sold			1,853,500
	Journal Entries
	Date	General Journal				Debit	Credit
	a)	Raw materials inventory				270,000
		Accounts payable					270,000
	b)	Work in process inventory				215,000
		Raw materials inventory					215,000
	c)	Facotry overhead				76,000
		Raw materials inventory					76,000
	d)	Work in process inventory				790,000
		Factory wages payable					790,000
	e)	Facotry overhead				785,000
		Factory wages payable					785,000
	f)	Factory wages payable				1,575,000
		cash					1,575,000
	g)	Factory overhead				87,000
		other accounts					87,000
	h)	Work in process inventory				948000
		factory overhead					948000
	i)	Finished goods inventory				1,793,500
		Work in process inventory					1,793,500
	j)	Cost of goods sold				1,853,500
		finished goods invnetory					1,853,500
		Accounts receivable				4,500,000
		sales					4,500,000