Question

For the year ended December 31, 2014, the job cost sheets of Cinta Company contained the following data.

Job Number		Explanation		Direct Materials		Direct Labor		Manufacturing Overhead		Total Costs
7640		Balance 1/1		$25,000		$24,000		$28,800		$77,800
		Current year�s costs		30,000		36,000		43,200		109,200
7641		Balance 1/1		11,000		18,000		21,600		50,600
		Current year�s costs		43,000		48,000		57,600		148,600
7642		Current year�s costs		58,000		55,000		66,000		179,000

Other Data:

1. Raw materials inventory totaled $15,000 on January 1. During the year, $140,000 of raw materials were purchased on account

2. Finished goods on January 1 consisted of Job No. 7638 for $87,000 and Job No. 7639 for $92,000

3. Job No. 7640 and Job No. 7641 were completed during the year.

4. Job Nos. 7638, 7639, and 7641 were sold on account for $530,000.

5. Manufacturing overhead incurred on account totaled $120,000.

6. Other manufacturing overhead consisted of indirect materials $14,000, indirect labor $18,000, and depreciation on factory machinery $8,000.

INSTRUCTIONS: a.) Create individual job cost sheets for each job and record the information in them. b.) Create individual Work in process inventory accounts for each job and one Summary Work in Process account. c.) Enter beginning balances in each account. d.) Record the appropriate journal entries for the current year’s activities and for the other data.Also post the information to T accounts. Determine the balance in Manufacturing Overhead and close the balance to Cost of Goods Sold. e.) Prepare the top half of the traditional income statement, ending with the determination of Gross Profit.

Answer 1

	Jobs	7640	7641	7642	Total
	Beginning balance	77800	50600	0	128400
	Added during month
	Direct material	30000	43000	58000	131000
	Direct labor	36000	48000	55000	139000
	Overheads	43200	57600	66000	166800
	Total cost	187000	199200	179000	565200
	Work in progress account
	Beginning balance	128400
	Direct material	131000
	Direct labor	139000
	Overheads	166800
	Total cost	565200
Less	transferred to Finished inventory	386200
	Ending balance	179000
	Journal entries
1	Raw material	140000
	Accounts payable		140000
2	Work in progress	131000
	Raw material		131000
3	Work in progress	139000
	Wages payable		139000
4	Work in progress	166800
	Manufacturing overheads		166800
5	Manufacturing overheads	120000
	Accounts payable		120000
6	Manufacturing overheads	40000
	Material inventory		14000
	Wages payable		18000
	Accumulated depreciation - factory machinery		8000
7	Finished goods inventory	386200
	Work in progress		386200
8	Accounts receivable	530000
	Sales revenue		530000
	Cost of goods sold	378200
	Finished goods inventory		378200
9	Manufacturing overheads	6800	(166800-160000)
	Cost of goods sold		6800
	Income statement
	Sales revenue		530000
Less	Unadjusted cost of goods sold	378200
	Overapplied manufacturing overheads	-6800	371400
	Gross profit		158600