Question

Forest Components makes aircraft parts. The following transactions occurred in July.

Purchased $16,890 of materials on account.
Issued $16,770 in direct materials to the production department.
Issued $1,300 of supplies from the materials inventory.
Paid for the materials purchased in transaction (1) using cash.
Returned $2,080 of the materials issued to production in (2) to the materials inventory.
Direct labor employees earned $32,600, which was paid in cash.
Purchased miscellaneous items for the manufacturing plant for $17,370 on account.
Recognized depreciation on manufacturing plant of $36,800.
Applied manufacturing overhead for the month.

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $434,600. Estimated overhead for the year was $404,178.
The following balances appeared in the inventory accounts of Forest Components for July.
Beginning Ending Materials Inventory ? $ 12,490
Work-in-Process Inventory ? 10,680
Finished Goods Inventory $ 2,640 7,010
Cost of Goods Sold ? 74,300

Required: a. Prepare journal entries to record these transactions.
b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Answer 1

	Journal entries
	Account names	Debit	Credit
1	Material inventory	16890
	Accounts payable		16890
2	Work in process inventory	16770
	Material inventory		16770
3	Manufacturing overheads	1300
	Material inventory		1300
4	Accounts payable	16890
	Cash		16890
5	Material inventory	2080
	Work in process inventory		2080
6	Work in process inventory	32600
	Cash		32600
7	Manufacturing overheads	17370
	Accounts payable		17370
8	Manufacturing overheads	36800
	Accumulated depreciation		36800
9	Work in process inventory	30318
	Manufacturing overheads		30318
		Material inventory
	Beginning inventory	11590
	(16770+1300+12490-16890-2080)	16890	16770
		2080	1300
	Ending inventory	12490
		Work in process inventory
	Beginning inventory	11742
	(2080+78670+10680-16770-32600-30318)	16770	2080
		32600	78670
		30318
	Ending inventory	10680
		Finished goods inventory
	Beginning inventory	2640
	Work in process to finished goods	78670	74300
	(74300+7010-78670)
	Ending inventory	7010

Cost of goods sold
Debit
74300