Question

The following transactions occurred in April at Steve’s Cabinets, a custom cabinet firm:

1. Purchased $22,000 of materials on account.

2. Issued $1,400 of supplies from the materials inventory.

3. Purchased $12,400 of materials on account.

4. Paid for the materials purchased in transaction (1) using cash.

5. Issued $14,800 in direct materials to the production department.

6. Incurred direct labor costs of $26,000, which were credited to Wages Payable.

7. Paid $22,400 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant.

8. Applied overhead on the basis of 125 percent of $26,000 direct labor costs.

9. Recognized depreciation on manufacturing property, plant, and equipment of $11,200.

The following balances appeared in the accounts of Steve’s Cabinets for April:
  

	Beginning			Ending
Materials Inventory	$	31,440			?
Work-in-Process Inventory		7,800			?
Finished Goods Inventory		34,400		$	29,240
Cost of Goods Sold					54,480

Required:

a. Prepare journal entries to record the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• 1

  Purchased $22,000 of materials.

• 2

  Issued $1,400 of supplies from the materials inventory.

• 3

  Purchased $12,400 of materials.

• 4

  Paid for the materials purchased in transaction (1).

• 5

  Issued $14,800 in direct materials to the production department.

• 6

  Incurred direct labor costs of $26,000, which were credited to Wages Payable.

• 7

  Paid $22,400 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant.

• 8

  Applied overhead on the basis of 125 percent of $26,000 direct labor costs.

• 9

  Recognized depreciation on manufacturing property, plant, and equipment of $11,200.

b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Answer 1

a) Journal Entries
No.	Account Titles and Explanation	Debit	Credit
1)	Raw Materials	$22,000
	Accounts Payable		$22,000
	(To record the purchase of materials on account)
2)	Supplies Expense	$1,400
	Supplies		$1,400
	(To record the issue of supplies from the materials inventory)
3)	Raw Materials	$12,400
	Accounts Payable		$12,400
	(To record the purchase of materials on account)
4)	Accounts Payable	$22,000
	Cash		$22,000
	(To record the payment for materials purchased on account)
5)	Work in process inventory	$14,800
	Direct Materials		$14,800
	(To record the issue of direct materials into production)
6)	Work in process inventory	$26,000
	Direct Labor		$26,000
	(To record the direct labor costs into production)
7)	Miscellaneous Expenses	$22,400
	Cash		$22,400
	(To record the payment of miscellaneous expenses)
8)	Work in process inventory	$32,760
	Manufacturing Overheads ($26,000*125/100)		$32,760
	(To record the application overheads)
9)	Depreciation Expense	$11,200
	Accumulated Depreciation		$11,200
	(To record the depreciation on the property, plant and equipment)

b) T-Accounts
Materials Inventory
Beg. Bal.	$31,440	Work in Process Inventory	$14,800
Purchases ($22,000 + $12,400)	$34,400	End. Bal. ($65,840 - $14,800)	$51,040
	$65,840		$65,840
Work In Process Inventory
Beg. Bal.	$7,800	Finished Goods Inventory (see note)	$49,320
Direct Materials	$14,800	End. Bal. ($81,360 - $49,320)	$32,040
Direct labor	$26,000
Manufacturing Overheads	$32,760
	$81,360		$81,360
Finished Goods Inventory
Beg. Bal.	$34,400	Cost of Goods Sold	$54,480
Work in Process Inventory ($54,480 + $29,240 - $34,400)	$49,320	End. Bal.	$29,240
	$83,720		$83,720
Cost of Goods Sold
Finished Goods Inventory	$54,480