Question

Blue Plate Construction organized in December and recorded the following transactions during its first month of operations.
Dec. 2    Purchased materials on account for $400,000.
Dec. 3    Used direct materials costing $100,000 on job no. 100.
Dec. 9    Used direct materials costing $150,000 on job no. 101.
Dec. 15    Used direct materials costing $30,000 on job no. 102.
Dec. 28    Applied the following direct labor costs to jobs: job no. 100, $9,000; job no. 101, $11,000; job no. 102, $5,000.
Dec. 28    Applied manufacturing overhead to all jobs at a rate of 300% of direct labor dollars.
Dec. 29    Completed and transferred job no. 100 and job no. 101 to the finished goods warehouse.
Dec. 30    Sold job no. 100 on account for $200,000.
Dec. 31    Recorded and paid actual December manufacturing overhead costs of $78,000, cash.
Dec. 31    Closed the Manufacturing Overhead account directly to Cost of Goods Sold.

a. Record each of these transactions as illustrated in the Job Order Costing section.

b. Compute the amount at which Cost of Goods Sold is reported in the company’s income statement for the month ended December 31.

c. Determine the inventory balances reported in the company’s balance sheet dated December 31.

d. Was manufacturing overhead in December overapplied, or was it underapplied? Explain.

Answer 1

Job Cost Sheet:
			100	101	102
Current cost incurred
Material			100000	150000	30000
labour			9000	11000	5000
Overheads @ 300% of DLC			27000	33000	15000
Total Cost			136000	194000	50000
Status			Sold	FG	Wip
Journal entries:
Date	Accounts title and explanations				Debit $	Credit $
2-Dec	Raw material inventory dr.				400000
	Accounts payable					400000
3-Dec	WIP Job No. 100 Dr.				100000
	Raw material inventory					100000
9-Dec	WIP Job No. 101 Dr.				150000
	Raw material inventory					150000
15-Dec	WIP Job No. 102 Dr.				30000
	Raw material inventory					30000
28-Dec	WIP Job No. 100 Dr				9000
	WIP Job no. 101 Dr.				11000
	WIP Job no. 102 Dr.				5000
	Factory wages account					25000
28-Dec	WIP Job No. 100 Dr				27000
	WIP Job no. 101 Dr.				33000
	WIP Job no. 102 Dr.				15000
	Manufacturing overheads					75000
29-Dec	Finished goods inventory Dr.				330000
	WIP Job no. 100					136000
	WIP Job no. 101					194000
30-Dec	Accounts receivable Dr.				200000
	Sales revenue					200000
	Cost of goods sold Dr.				136000
	Finished Goods inventory					136000
31-Dec	Manufacturing overheads Dr.				78000
	Cash account					78000
31-Dec	Cost of goods sold Dr.				3000
	Mannufacturing Overheads					3000
Req b:
Unadjusted cost of goods sold (Costt of Job 100)					136000
Add: manufacturing overheads under-applied					3000
Adjusted cost of goods sold					139000
Req c:
Raw material inventory:
Purchases		400000
Less: Issued
Job 100	100000
Job 101	150000
Job 102	130000	380000
Ending RM inventory		20000
WIP inventory Job no. 102 = 50000
Finished Goods inventory Job no. 101 = 194000
Req d:
Manufacturing OH was underapplied to the extent of $ 3000.
As the overheads incurred is more than applied and the overheads accounts is having a debit balance.