Question

7. The Trump Corporation uses a job-order costing system. The following activities took place during the month of May:

a.	Raw materials purchased	$40,000
b.	Raw materials (all direct) used in production	$35,000
c.	Salaries and wages costs:
	Direct labor cost	$60,000
	Indirect labor cost	$30,000
	Sales salaries	$25,000
d.	Factory utility costs	$15,000
e.	Depreciation on factory equipment	$50,000
f.	Advertising expense	$80,000
g.	Manufacturing overhead is applied at the predetermined rate of 150% of direct labor cost.
h.	Cost of Goods Manufactured for the month	$180,000
i.	Cost of Goods Sold for the month	$150,000

Required:

Prepare journal entries to record the information given above. Key your entries by the letters a through i.

8) Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:

A) started in process during the period.

B) in process during the period.

C) completed and sold during the period.

D) completed during the period.

9) Refer to the T-account below:

Manufacturing Overhead
(2)	4,000	(9)	150,000
(3)	15,000
(4)	80,000
(5)	30,000
(6)	25,000
	154,000		150,000
Bal.	4,000

Entry (4) could represent all of the following except:

A) Indirect labor cost incurred.

B) Factory insurance cost.

C) Overhead cost applied to Work in Process.

D) Depreciation on factory equipment.

10) Refer to the T-account below:

Work In Process
Bal.	30,000	(12)	270,000
(4)	90,000
(6)	70,000
(9)	110,000
Bal.	30,000

Entry (12) could represent which of the following?

A) Direct labor cost incurred in production.

B) Purchases of raw materials.

C) The cost of goods manufactured transferred to Finished Goods.

D) The cost of indirect materials incurred in production.

Answer 1

1) Journal Entries:
Date	Acc. Titles	Dr. $	Cr. $
a	RM	40000
	Cash		40000
	(raw material purchased for cash)
b	WIP	35000
	RM		35000
	(RM put to production)
c	WIP	60000
	Manuf. OH	30000
	Selling & Admin Exp.	25000
	Payroll		115000
	(wages and salaries incurred)
d & e	Manuf. OH	65000
	Utility Costs		15000
	Depre - Factory		50000
	(Utility & Depre incurred to production)
f	Selling & Admin Exp.	80000
	Advertising exp.		80000
	(advertising exp. Incurred)
g	WIP	90000		(60000*150%)
	Manuf. OH		90000
	(application of OH to production)
h	FG	180000
	WIP		180000
	(Finished Goods transferred from WIP)
i	COGS	150000
	FG		150000
	(Cost of sales recorded)
8) Answer : D) completed during the period
(because completed goods are transferred to FG)
9) Answer : C) Overhead cost applied to Work in Process
(because it is always credited to OH a/c)
10) Answer : C) The cost of goods manufactured transferred to Finished Goods.
(because WIP is credited for transfer of finished goods)