Question

ABC Co. recorded the following transactions for the just completed month. The company had no beginning inventories.

a) $157,000 in raw materials were purchased on account.

b) $135,000 in raw materials were requisitioned for use in production. Of this amount, $122,000 was for direct materials and the remainder was for indirect materials.

c) Total labor wages of $165,000 were incurred and paid. Of this amount, $145,000 was for direct labor and the remainder was for indirect labor.

d) Additional manufacturing overhead costs of $155,500 were incurred and paid.

e) Manufacturing overhead costs of $190,000 were applied to jobs using the company’s predetermined overhead rate.

f) Of the jobs in progress at the end of the month, $425,500 were completed and shipped to customers.

g) Any underapplied or overapplied overhead for the period was closed out to Cost of Goods Sold.

Required:

1. Post the above transactions to T-accounts (only to the T-accounts shown below). Label each entry.

Raw Material, Work in Process, Manufacturing O/H, Finished Goods, Cost of Goods Sold

2. Determine the cost of goods sold for the period.

Answer 1

Solution 1:

Raw material
Event	Particulars	Debit	Event	Particulars	Credit
a	Accounts payable	$157,000.00	b	Work In Process	$122,000.00
			b	Manufacturing Overhead	$13,000.00
				Ending balance	$22,000.00
	Total	$157,000.00		Total	$157,000.00

Work In Process
Event	Particulars	Debit	Event	Particulars	Credit
b	Raw material inventory	$122,000.00	f	Finished goods	$425,500.00
c	Factory Wages	$145,000.00		Ending balance	$31,500.00
e	Manufacturing overhead	$190,000.00
	Total	$457,000.00		Total	$457,000.00

Manufacturing overhead
Event	Particulars	Debit	Event	Particulars	Credit
b	Raw material inventory	$13,000.00	e	Work In Process	$190,000.00
c	Factory Wages	$20,000.00
d	Cash	$155,500.00
g	Cost of goods sold (Overapplied overhead)	$1,500.00
	Total	$190,000.00		Total	$190,000.00

Finished goods
Event	Particulars	Debit	Event	Particulars	Credit
f	Work In Process	$425,500.00	f	Cost of goods sold	$425,500.00
	Total	$425,500.00		Total	$425,500.00

Cost of goods sold
Event	Particulars	Debit	Event	Particulars	Credit
f	Finished goods	$425,500.00	g	Manufacturing overhead	$1,500.00
				Ending balance	$424,000.00
	Total	$425,500.00		Total	$425,500.00

Solution 2:

Cost of goods sold for the periods = $425,500 - $1,500 = $424,000