Question

1. Ehrling Brothers Company makes jobs to customer order. During the month of July, the following occurred:

   1. Materials were purchased on account for $45,620.
   2. Materials totaling $40,880 were requisitioned for use in producing various jobs.
   3. Direct labor payroll for the month was $25,600 with an average wage of $16 per hour.
   4. Actual overhead of $8,850 was incurred and paid in cash.
   5. Manufacturing overhead is charged to production at the rate of $5.40 per direct labor hour.
   6. Completed jobs costing $60,000 were transferred to Finished Goods.
   7. Jobs costing $58,000 were sold on account for $ 73,750. Make the entry to record the revenue from the sale first, followed by the entry to record the cost of the jobs.

   Beginning balances as of July 1 were:

   Materials Inventory	$1,300
   Work-in-Process Inventory	3,400
   Finished Goods Inventory	2,620

   Required:

   1. Prepare the journal entries for the preceding events.

   a.
   b.
   c.
   d.
   e.
   f.
   g (1).
   g (2).

   2. Calculate the ending balances of:

   a. Materials Inventory	$
   b. Work-in-Process Inventory	$
   c. Overhead Control	$
   d. Finished Goods Inventory	$

Answer 1

1. Prepare the journal entries for the preceding events.

a.	Materials	$45620
	Accounts payable		$45620
	(To record materials purchased on account)
b.	Work in process	$40880
	Materials		$40880
	(To record materials used in production)
c.	Work in process	$25600
	Wages payable		$25600
	(To record direct labor cost incurred)
d.	Overhead Control	$8850
	Cash		$8850
	(To record manufacturing overhead paid in cash)
e.	Work in process ($25600/16*5.40)	$8640
	Overhead Control		$8640
	(To record overhead applied)
f.	Finished goods	$60000
	Work in process		$60000
	(To record work in process transferred to finished goods)
g (1).	Accounts receivable	$73750
	Sales revenue		$73750
	(To record sales revenue)
g (2).	Cost of goods sold	$58000
	Finished goods		$58000
	(To record cost of goods sold)

2. Calculate the ending balances of:

a. Materials Inventory	$6040
b. Work-in-Process Inventory	$18520
c. Overhead Control	$210 underapplied
d. Finished Goods Inventory	$4620

Materials inventory= Beginning inventory+Materials purchased-Materials used

= $1300+45620-40880= $6040

Work-in-Process inventory= Beginning inventory+Direct materials+Direct labor+Overhead applied-Transferred to Finished goods

= $3400+40880+25600+8640-60000= $18520

Overhead Control= Actual overhead-Applied overhead

= $8850-8640= $210 underapplied

Finished goods inventory= Beginning inventory+Transferred from Work-in-Process-Cost of goods sold

= $2620+60000-58000= $4620