Question

Thirteenth Edition College Accounting Chapters 1-30

Chapter 27 Problem Set A

OBJECTIVE: Recording purchase and issuance of direct and indirect materials, recording labor costs, applying overhead, computing overapplied or underapplied overhead, recording cost of jobs completed, and cost of goods sold.

In April 2013, NoCal Trailers Co. had the following cost data:

COST DATA

a. Raw materials costing $82,000 were purchased.

b. Raw materials costing $80,000 were used: direct materials, $75,000; indirect materials $5,000.

c. Factory wages of $52,000 were incurred: direct labor $50,000; indirect labor $2,000. Social security tax deductions were $3,224, Medicare tax deductions were $754, federal income tax deductions were $7,800.

d. Other overhead costs of $28,000 were incurred. (Credit Accounts Payable.)

e. Estimated manufacturing overhead costs were applied to jobs in production at the rate of 80 percent of direct labor costs

f. Finished goods costing $150,000 were transferred from production to the warehouse.

g. The cost of goods sold was $120,000.

h. Sales on account for the month were $250,000.

INSTRUCTIONS (These are to be created in separate worksheets called the general journal, Manufacturing Overhead Computations worksheet, and the partial income statement)

1. Prepare general journal entries to record each item of cost data given. Use the account titles listed in your textbook.

2. Compute the amount of over applied or under applied overhead for the month.

3. Prepare a partial income statement for April. Adjust the Cost of Goods Sold for any over applied or under applied overhead.

Analyze: Based on the partial income statement you have prepared, what portion of each sales dollar is realized as gross profit?,

Answer 1

Req 1.
Journal entries:
S.no.	Accounts title and explanations					Debit $	Credit $
a.	Raw material Inventory Dr.					82000
	Accounts payable account						82000
b.	Work in process inventory Dr.					75000
	Manufacturing Overheads Dr.					5000
	Raw material Inventory account						80000
c.	Factory wages expense Dr.					52000
	Social Security tax payable						3224
	Medicare tax payable						754
	Federal income tax payable						7800
	Wages payable						40222
	Work in process inventory Dr.					50000
	Manufacturing overheads Dr.					2000
	Factory wages expense account						52000
d.	Manufacturing Overheads Dr.					28000
	Accounts payable account						28000
e.	Work in process Account Inventory Dr.					40000
	Manufacturing Overheads						40000
f.	Finished Goods inventory Dr.					150000
	Work in process inventory Account						150000
g.	Cost of Goods sold Account Dr.					120000
	Finished Goods inventory						120000
h.	Accounts receivable Dr.					250000
	Sales revenue account						250000
Req 2:
Under/Over applied Overheads:
OH actually incurred (5000+2000+28000)				35000
OH applied (50000*80%)				40000
Over-applied OH				5000
Req 3:
Income Statement:
Sales revenue				250000
Less: Adjusted Cost of Goods sold
Cost of goods sold unadjusted			120000
Less: Over-applied Overheads			5000	115000
Gross Margin				135000