Question

• Sierra Company manufactures woven blankets and accounts for product costs using process costing. The company uses a single processing department. The following information is available regarding its May inventories.
  

  	Beginning Inventory			Ending Inventory
  Raw materials inventory	$	60,000		$	92,500
  Work in process inventory		435,000			515,000
  Finished goods inventory		633,000			605,000

  
  The following additional information describes the company's production activities for May.
  

  Raw materials purchases (on credit)	$	250,000
  Factory wages cost (paid in cash)		1,530,000
  Other overhead cost (Other Accounts credited)		87,000
  Materials used
  Direct	$	157,500
  Indirect		60,000
  Labor used
  Direct	$	780,000
  Indirect		750,000
  Overhead rate as a percent of direct labor		115	%
  Sales (on credit)	$	2,500,000

  Requirement
• General Journal
• General Ledger
• Trial Balance
• Raw Materials
• Cost of Goods Mfg
• Cost of Goods Sold
• Gross Profit

General Journal tab - Prepare journal entries to record the transactions of Sierra Company during the month of May.

Cost of Materials Used tab - Calculate the total cost of direct materials used in production during May.

Cost of Goods Manufactured tab - Prepare a schedule of cost of goods manufactured for Sierra Company for the month of May.

Cost of Goods Sold tab - Prepare a schedule of cost of goods sold for Sierra Company for the month of May.

Gross Profit tab - Calculate the gross profit on sales for May.

Answer 1

1.

	General Journal	Debit	Credit
1	Raw material inventory	$250,000
	Accounts payable		$250,000
2	Factory wages	$1,530,000
	Cash		$1,530,000
3	Factory overhead	$87,000
	Other accounts		$87,000
4	Work in process inventory	$157,500
	Factory overhead	60,000
	Raw material inventory		$217,500
5	Work in process inventory	$780,000
	Factory overhead	750,000
	Factory wages		$1,530,000
6	Work in process inventory ($780,000*115%)	$897,000
	Factory overhead		$897,000
7	Finished goods inventory (435,000+157,500+780,000+897,000-515,000)	$1,754,500
	Work in process inventory		$1,754,500
8	Cost of goods sold ($633,000+1,754,500-605,000)	$1,782,500
	Finished goods inventory		$1,782,500
9	Accounts receivable	$2,500,000
	Sales		$2,500,000

2.

Direct material used in production during May
Beginning raw material inventory	$60,000
Add: Raw material purchases	250,000
Raw material available	310,000
Less: Ending raw material inventory	92,500
Raw material used	217,500
Less: Indirect material	60,000
Direct material used in production	$157,500

3.

Schedule of Cost of Goods Manufactured
Direct material used in production	$157,500
Direct labor	780,000
Factory overhead applied	897,000
Total manufacturing cost		$1,834,500
Add: Beginning work in process inventory		435,000
Less: Ending work in process inventory		515,000
Cost of goods manufactured		$1,754,500

4.

Schedule of Cost of Goods Sold
Cost of goods manufactured	$1,754,500
Add: Beginning finished goods inventory	633,000
Cost of goods available for sale	2,387,500
Less: Ending finished goods inventory	605,000
Cost of goods sold	$1,782,500

5.

Sales	$2,500,000
Cost of goods sold	1,782,500
Gross profit	$717,500