Question

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.

Purchased raw materials on credit, $200,000.

Materials requisitions record use of the following materials for the month.

Job 136	$	49,500
Job 137		33,000
Job 138		19,600
Job 139		23,000
Job 140		6,800
Total direct materials		131,900
Indirect materials		21,000
Total materials used	$	152,900

Paid $16,000 cash to a computer consultant to reprogram factory equipment.

Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$	12,000
Job 137		10,500
Job 138		37,500
Job 139		39,000
Job 140		3,800
Total direct labor		102,800
Indirect labor		25,500
Total	$	128,300

Applied overhead to Jobs 136, 138, and 139.

Transferred Jobs 136, 138, and 139 to Finished Goods.

Sold Jobs 136 and 138 on credit at a total price of $550,000.

The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Depreciation of factory building	$	69,000
Depreciation of factory equipment		38,500
Expired factory insurance		10,000
Accrued property taxes payable		35,000

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.

3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.

	Raw Materials Inventory Work in Process Inventory End.bal. 0 End.bal. 0 Factory Overhead Finished Goods Inventory End.bal. 0 End.bal. 0 Cost of Goods Sold End.bal. 0

Answer 1

Raw Materials Inventory A/c
Debit			Credit
Accounts Payable	$ 200,000.00	Work In Process Inventory	$ 131,900.00
		Factory Overhead	$    20,000.00
		Closing Balance	$    48,100.00
Total	$ 200,000.00	Total	$ 200,000.00

Work in Process Inventory
Debit			Credit
Raw Materials Inventory	$ 131,900.00	Finished Goods Inventory	$ 357,600.00
Factory Payroll	$ 102,800.00	(Working note-1)
Factory Overhead	$ 177,000.00
($12000+$37500+$39000)*200%
Factory Overhead	$    28,600.00
($10500+3800)*200%
		Closing Balance	$    82,700.00
Total	$ 440,300.00	Total	$ 440,300.00

Factory Overhead
Debit			Credit
Raw Materials Inventory A/c	$    20,000.00	Work in Process Inventory	$ 177,000.00
Cash	$    16,000.00	Work in Process Inventory	$    28,600.00
Factory Payroll	$    25,500.00
Depreciation—Factory building	$    69,000.00
Depreciation—Factory equipment	$    38,500.00
Prepaid insurance	$    10,000.00
Property taxes payable	$    35,000.00
		Closing Balance	$      8,400.00
Total	$ 214,000.00	Total	$ 214,000.00

Finished Goods Inventory
Debit			Credit
Work in Process Inventory	$ 357,600.00	Cost of goods Sold	$ 217,600.00
		($85,500+132100)
		Closing Balance	$ 140,000.00
Total	$ 357,600.00	Total	$ 357,600.00

Cost of goods Sold
Debit			Credit
Finished Goods Inventory	$ 217,600.00
		Closing Balance	$ 217,600.00
Total	$ 217,600.00	Total	$ 217,600.00

Working Note-1

	Job No. 136	Job No. 137	Job No. 138	Job No. 139	Job No. 140
Materials	$ 49,500.00	$ 33,000.00	$ 19,600.00	$ 23,000.00	$   6,800.00
Labor	$ 12,000.00	$ 10,500.00	$ 37,500.00	$ 39,000.00	$   3,800.00
Overhead (200% of labor)	$ 24,000.00	$ 21,000.00	$ 75,000.00	$ 78,000.00	$   7,600.00
Total cost	$ 85,500.00	$ 64,500.00	$132,100.00	$140,000.00	$ 18,200.00