Question

Forest Components makes aircraft parts. The following transactions occurred in July.

1. Purchased $16,980 of materials on account.

2. Issued $16,800 in direct materials to the production department.

3. Issued $1,240 of supplies from the materials inventory.

4. Paid for the materials purchased in transaction (1) using cash.

5. Returned $2,010 of the materials issued to production in (2) to the materials inventory.

6. Direct labor employees earned $32,700, which was paid in cash.

7. Purchased miscellaneous items for the manufacturing plant for $17,330 on account.

8. Recognized depreciation on manufacturing plant of $36,100.

9. Applied manufacturing overhead for the month.

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $435,400. Estimated overhead for the year was $387,506.

The following balances appeared in the inventory accounts of Forest Components for July.

	Beginning			Ending
Materials Inventory		?		$	12,460
Work-in-Process Inventory		?			10,670
Finished Goods Inventory	$	2,690			7,090
Cost of Goods Sold		?			73,600

Required:

a. Prepare journal entries to record these transactions.

b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Answer 1

predeternined overhead rate
estimated overhead/estimated direct labor costs
387506/435400
89%
TR	General journal				Debit	Credit
1)	Raw materials inventory				16,980
	Accounts payable					16,980
2)	Work in process inventory				16,800
	Raw materials inventory					16,800
3)	manufacturing overhead				1,240
	Raw materials inventory					1,240
4)	Accounts payable				16,980
	cash					16,980
5)	Raw materials inventory				2,010
	work in process inventory					2,010
6)	work in process inventory				32,700
	cash					32,700
7)	manufacturing overhead				17,330
	Accounts payable					17,330
8)	Manufacturing overhead				36,100
	Accumulated depreciation					36,100
9)	work in process inventory				29103
	applied Manufacturing overhead					29,103
	(32700*89%)
Materials inventory
Beg.Bal	11,510				Work in process inventory
1)	16,980	16,800	2)		beg .bal	12,077
5)	2,010	1,240	3)		2)	16,800	2,010	5)
					6)	32,700	78,000	Trfd to finished
					9)	29103		goods
end bal	12,460
					End bal	10,670
Manufacturing overhead control					Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	1,240						29103	9)
7)	17,330
8)	36,100
End bal	54670				end bal		29103
Accounts payable					Cash
Beg.Bal		0			Beg.Bal	0
4)	16,980	16,980	1)				16,980	4)
		17,330	7)				32,700	6)
End bal		17,330			End bal		49,680
Accumulated Depreciation -PP&E					finished goods inventory
Beg.bal		0			Beg bal	2,690
		36,100	8)		goods com	78,000	73,600	Trfd to COGS
End bal		36100			end bal	7,090
cost of goods sold
Beg.Bal	0
Goods comp	73,600
End bal	73600