Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $210,000.
2. Raw materials used in production, $188,000 ($150,400 direct materials and $37,600 indirect materials).
3. Accrued direct labor cost of $48,000 and indirect labor cost of $22,000.
4. Depreciation recorded on factory equipment, $105,000.
5. Other manufacturing overhead costs accrued during October, $129,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $9 per machine-hour. A total of 76,400 machine-hours were used in October.
7. Jobs costing $513,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $452,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 26% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $37,000.

Answer 1

Solution 1:
Journal Enteries - Polaris Company
S. No	General Journal	Debit	Credit
a	Raw Material Inventory Dr	$2,10,000.00
	To Accounts Payable		$2,10,000.00
	(Raw material purchased on account)
b	Work In Process Dr	$1,50,400.00
	Manufacturing Overhead Dr	$37,600.00
	To Raw Material Inventory		$1,88,000.00
	(Being Raw material used in production)
c	Work In Process Dr	$48,000.00
	Manufacturing Overhead Dr	$22,000.00
	To Wages Payable		$70,000.00
	(Being labor cost accrued)
d	Manufacturing overhead Dr	$1,05,000.00
	To Accumulated depreciation - Factory Equipment		$1,05,000.00
	(Being depreciation charged on factory equipment)
e	Manufacturing overhead Dr	$1,29,000.00
	To Accounts Payable		$1,29,000.00
	(Being other manufacturing overhead cost incurred)
f	Work In Process Dr (76400 * $9)	$6,87,600.00
	To Manufacturing overhead		$6,87,600.00
	(Being manufacturing overhead applied to prodcution)
g	Finished Goods Inventory Dr	$5,13,000.00
	To Work In Process		$5,13,000.00
	(Being cost of completed goods transferred to finished goods)
h-1	Cost of goods sold Dr	$4,52,000.00
	To Finished Goods Inventory		$4,52,000.00
	(Being cost of unit sold transferred to COGS)
h-2	Accounts Receivables Dr ($452,000*126%)	$5,69,520.00
	To Sales Revenue		$5,69,520.00
	(To record sales on account)

Solution 2:
Manufacturing Overhead Account
Particulars	Debit	Particulars	Credit
To Raw material inventory	$37,600.00	By Work In Process	$6,87,600.00
To Wages Payable	$22,000.00
To Accumulated depreciation - Factory Equipment	$1,05,000.00
To Accounts Payable	$1,29,000.00
To Ending balance	$3,94,000.00
Total	$6,87,600.00	Total	$6,87,600.00

Work in Process Account
Particulars	Debit	Particulars	Credit
To Beginning Balance	$37,000.00	By Finished goods inventory	$5,13,000.00
To Raw Material Inventory	$1,50,400.00	By Ending balance	$4,10,000.00
To Wages Payable	$48,000.00
To Manufacturing overhead applied	$6,87,600.00
Total	$9,23,000.00	Total	$9,23,000.00