Question

Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows. Purchased raw materials on credit, $240,000. Materials requisitions record use of the following materials for the month. Job 136 $ 48,500 Job 137 33,000 Job 138 19,600 Job 139 23,200 Job 140 7,400 Total direct materials 131,700 Indirect materials 21,000 Total materials used $ 152,700 Paid $15,750 cash to a computer consultant to reprogram factory equipment. Time tickets record use of the following labor for the month. These wages were paid in cash. Job 136 $ 12,200 Job 137 10,500 Job 138 37,500 Job 139 39,400 Job 140 3,400 Total direct labor 103,000 Indirect labor 26,000 Total $ 129,000 Applied overhead to Jobs 136, 138, and 139. Transferred Jobs 136, 138, and 139 to Finished Goods. Sold Jobs 136 and 138 on credit at a total price of $525,000. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance). Depreciation of factory building $ 69,500 Depreciation of factory equipment 37,000 Expired factory insurance 12,000 Accrued property taxes payable 36,000 Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost. rev: 08_17_2017_QC_CS-95840 Problem 15-3A Part 1 Required: 1. Prepare a job cost sheet for each job worked on during the month. 2. Prepare journal entries to record the events and transactions a through i. 3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance. 4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.

Answer 1

1. Prepare a job cost sheet for each job worked on during the month.

Total Cost of a Job = Direct Materials + Direct Labor + Applied Manufacturing Overhead

Widmer Watercraft’s

Job Cost Sheet

For the month of May 2017

(Amount in dollars)

	Job 136	Job 137	Job 138	Job 139	Job 140
Direct Materials	48,500	33,000	19,600	23,200	7,400
Direct labor	12,200	10,500	37,500	39,400	3,400
Manufacturing Overhead (200% of Direct labor)	24,400	21,000	75,000	78,800	6,800
Total Cost	85,100	64,500	132,100	141,400	17,600

2. Prepare journal entries to record the events and transactions a through i

Transaction	General Journal	Debit	Credit
a.	Purchase of Raw material
	Raw Materials Inventory	240,000
	Accounts Payable		240,000
b.	Material Requisition
	Work in Process Inventory	131,700
	Manufacturing Overhead	21,000
	Raw materials Inventory		152,700
c.	Paid $15,750 cash to a computer consultant to reprogram factory equipment
	Manufacturing Overhead	15,750
	Cash		15,750
d.	Use of labor/Wages Paid
	Work In Process Inventory	103,000
	Manufacturing Overhead	26,000
	Cash		129,000
e.	Applied overhead to Jobs 136, 138, and 139. (W.N:1)
	Work In Process Inventory	178,200
	Manufacturing Overhead		178,200
f.	Transferred Jobs 136, 138, and 139 to Finished Goods (W.N:2)
	Finished Goods	358,600
	Work in process Inventory		358,600
g.	Sold Jobs 136 and 138
	Accounts Receivable	525,000
	Sales Revenue		525,000
g.1	Recording cost of goods sold (W.N:3)
	Cost of goods sold	217,200
	Finished goods inventory		217,200
h.	The company incurred the following overhead costs during the month:
	Manufacturing Overhead	154,500
	Accumulated Depreciation –Factory building		69,500
	Accumulated Depreciation – Factory equipment		37,000
	Prepaid Insurance		12,000
	Property taxes payable		36,000
i.	Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) (W.N:4)
	Work In Process Inventory	27,800
	Manufacturing Overhead		27,800

Note: In the given question transactions numbers’ are missing so I am putting transaction number according to the occurrence in the question with the title for the better understanding.

Working Notes (W.N):

1. Total manufacturing overhead for job 136,138 and 139

Applied Manufacturing overhead = 200% of direct labor

Job 136 : 12,200*200%	24,400
Job 138: 37,500*200%	75,000
Job 139: 39,400*200%	78,800
Total	178,200

2. Transferred Cost to Finished Goods

Job 136 :	85,100
Job 138:	132,100
Job 139:	141,400
Total	358,600

3. Cost of goods sold for Job 136 and 138

Job 136 :	85,100
Job 138:	132,100
Total	217,200

4. Total manufacturing overhead for job 137 and 140

Applied Manufacturing overhead = 200% of direct labor

Job 137 : 10,500*200%	21,000
Job 140: 3,400*200%	6,800
Total	27,800

3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.

Note: The accounts are given in the question in which transaction has to be transferred.

So, in the absence of the details I have posting the transactions into the main accounts which are as follows:

a. Raw materials Inventory

b. Work-In Process Inventory

c. Manufacturing Overhead

d. Finished goods

e. Cost of goods sold

a. Raw Materials Inventory

Debit		Credit
a. Accounts Payable	240,000	b. Work in Process Inventory	131,700
		c. Manufacturing Overhead	21,000
		Balance C/F	87,300
	240,000		240,000

b. Work-in process inventory

Debit		Credit
b. Raw Materials Inventory	131,700	f. Finished goods	358,600
d. cash	103,000
e. Manufacturing Overhead	178,200	Balance C/F	82,100
i. Manufacturing Overhead	27,800
	440,700		440,700

c. Manufacturing Overhead

Debit		Credit
b. Raw Materials Inventory	21,000	e. Work In Process Inventory	178,200
c. Cash	15,750	i. Work In Process Inventory	27,800
d. Cash	26,000
h. Accumulated Depreciation – Factory building	69,500
h. Accumulated Depreciation – Factory equipment	37,000
h. Prepaid Insurance	12,000
h. Property taxes payable	36,000	Balance C/F	11,250
	217,250		217,250

d. Finished goods

Debit		Credit
f. Work In Process	358,600	g.1 Cost of goods sold	217,200
		Balance C/F	141,400
	358,600		358,600

e. Cost of goods sold

Debit		Credit
g.1 Finished goods	217,200	Balance C/F	217,200

4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.

JOB COSTS REPORT
	Amount in $
Work In Process Inventory
Cost of Job 137	64,500
Cost of Job 140	17,600
Ending Balance of Work in process Inventory	82,100
Finished Goods
Cost of Job 139	141,400
Ending Balance of Finished goods	141,400
Cost of goods sold
Cost of Job 136	85,100
Cost of Job 138	132,100
Ending balance of Cost of goods sold	217,200

Notes:

Work in Process: Out of 5 Jobs 136,137,138,139 and 140, 3 Jobs 136,138 and 139 are completed and transferred to finished goods. So remaining Jobs 137 and 140 are in process only

Finished goods: Out of 3 Jobs 136,138 and 139 are transferred from work in process, 2 Jobs 136 and 138 are sold. So, only Job 139 remains as finished goods

Cost of goods sold: Job 136 and 138 sold during the period.