Question

Vaden Company is a manufacturing firm that uses job-order costing. At the beginning of

the year, the company’s inventory balances were as follows:

Raw materials

$39,000

Work in process

$49,000

Finished goods

$10,000

The company applies overhead to jobs using a predetermined overhead rate based on

machine-hours. At the beginning of the year, the company estimated that it would work

22,000 machine-hours and incur $264,000 in manufacturing overhead cost. The

following transactions were recorded for the year:

i.

Raw materials were purchased, $301,000.

ii.

Raw materials were requisitioned for use in production, $292,000 ($273,000

direct and $19,000 indirect).

iii.

The following employee costs were incurred: direct labor - $296,000; indirect

labor - $81,000; and administrative salaries, $181,000.

iv.

Selling costs, $130,000.

v.

Factory utility costs, $18,000.

vi.

Depreciation for the year was $162,000 of which $155,000 is related to

factory operations and $7,000 is related to selling and administrative

activities.

vii.

Manufacturing overhead was applied to jobs. The actual level of activity for

the year was 21,000 machine-hours.

viii.

Goods totaling $839,000 were transferred to finished goods.

ix.

Sales for the year totaled $1,200,000 and the costs on the job cost sheets of the

goods that were sold totaled $824,000.

x.

The balance in the Manufacturing Overhead account was closed out to Cost of

Goods Sold.

Required (15 points):

a. Prepare the appropriate journal entries for each of the above items.

b. Show in T-accounts the year-end balances for each of the inventory accounts, the cost

of goods sold and manufacturing overhead.

Answer 1

Serial No.	Account Title & Explanations	Debit($)	Credit($)
i)	Raw Material Inventory	301000
	Cash		301000
	(purchase of raw material recorded)
ii)	Work In Process	273000
	Manufacturing Overhead	19000
	Raw Material Inventory		292000
	(Direct and indirect material issued to production)
iii)	Work In Process	296000
	Manufacturing Overhead	81000
	Administrative salaries	181000
	Cash		558000
	(payment for direct and indirect labour and administrative salaries)
iv)	Selling Expense	130000
	Cash		130000
	(payment of selling expenses)
v)	Manufacturing Overhead	18000
	Cash		18000
	(Factory utility cost paid in cash)
vi)	Manufacturing Overhead	155000
	depreciation expense -selling & administration	7000
	Accumulated depreciation		162000
	(depreciation expenses charged)
vii)	Work In process	252000
	Manufacturing Overhead		252000
	(Manufacturing Overhead applied to production)
viii)	Finished goods account	839000
	Work In process		839000
	(transferred to the finsihed goods account)
ix)	Accounts receivable	1200000
	Sales		1200000
	(sales recorded)
	Cost of goods sold	824000
	Finished goods account		824000
	(cost of goods sold recorded)
xi)	Cost of goods sold	21000
	Manufacturing overhead		21000

Raw Material
Particulars	Amount($)	Particulars	Amount($)
Balance b/f	39000	WIP	273000
cash	301000	Manufactring overhead	19000
		Balance c/f	48000
	340000		340000
WIP
Particulars	Amount($)	Particulars	Amount($)
Balance b/f	49000	Finished Goods	839000
Raw Material	273000
cash	296000
Manufacturing overhead	252000	Balance c/f	31000
	870000		870000
Finished Goods
Particulars	Amount($)	Particulars	Amount($)
Balance b/f	10000	Cost of goods sold	824000
WIP	839000	Balance c/f	25000
	849000		849000
Cost of goods sold
Particulars	Amount($)	Particulars	Amount($)
Finished Goods	824000
Manufacturing overhead	21000	Balance c/f	845000
	845000		845000
Manufacturing Overhead
Particulars	Amount($)	Particulars	Amount($)
Raw Material	19000	WIP	252000
cash	81000
cash	18000
accumulated depreciation	155000	Cost of goods sold	21000
	273000		273000