Question

Problem 2-3A Source documents, journal entries, and accounts in job order costing LO P1, P2, P3

[The following information applies to the questions displayed below.]

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.

1. Purchased raw materials on credit, $260,000.
2. Materials requisitions record use of the following materials for the month.

Job 136	$	48,500
Job 137		33,500
Job 138		20,000
Job 139		23,200
Job 140		6,600
Total direct materials		131,800
Indirect materials		20,000
Total materials used	$	151,800

3. Paid $15,250 cash to a computer consultant to reprogram factory equipment.
4. Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$	12,100
Job 137		10,700
Job 138		37,900
Job 139		39,400
Job 140		3,600
Total direct labor		103,700
Indirect labor		24,500
Total	$	128,200

5. Applied overhead to Jobs 136, 138, and 139.
6. Transferred Jobs 136, 138, and 139 to Finished Goods.
7. Sold Jobs 136 and 138 on credit at a total price of $525,000.
8. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Depreciation of factory building	$	68,500
Depreciation of factory equipment		37,500
Expired factory insurance		11,000
Accrued property taxes payable		36,000

9. 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.

Problem 2-3A 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.

	Job 136	Job 137	Job 138	Job 139	Job 140	Total
Balance, May 1	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Costs incurred during May
Direct Materials	48,500	33,500	20,000	23,200	6,600	131,800
Direct Labor	12,100	10,700	37,900	39,400	3,600	103,700
Overhead	24,200	21,400	75,800	78,800	7,200	207,400
Total Manufacturing Costs	84,800	65,600	133,700	141,400	17,400	442,900
Total Cost of Work in Process	84,800	65,600	133,700	141,400	17,400	442,900
Completed and Transferred Out	(84,800)	-	(133,700)	(141,400)	-	(359,900)
Balance, May 31	0	65,600	0	0	17,400	83,000

2.

Transaction / Event	Account Titles	Debit	Credit
		$	$
1.	Raw Materials Inventory	260,000
	Accounts Payable		260,000
2.	Work in Process Inventory	131,800
	Overhead	20,000
	Raw Materials Inventory		151,800
3.	Overhead	15,250
	Cash		15,250
4.	Work in Process Inventory	103,700
	Overhead	24,500
	Cash		128,200
5.	Work in Process Inventory	178,800
	Overhead		178,800
6.	Finished Goods Inventory	359,900
	Work in Process Inventory		359,900
7.a	Accounts Receivable	525,000
	Sales Revenue		525,000
7. b	Cost of Goods Sold	218,500
	Finished Goods Inventory		218,500
8	Overhead	153,000
	Accumulated Depreciation : Factory Building		68,500
	Accumulated Depreciation : Factory Equipment		37,500
	Prepaid Insurance		11,000
	Property Taxes Payable		36,000
9.	Work in Process Inventory	28,600
	Overhead		28,600