Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

Raw materials purchased on account, $210,000.

Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).

Accrued direct labor cost of $48,000 and indirect labor cost of $21,000.

Depreciation recorded on factory equipment, $105,000.

Other manufacturing overhead costs accrued during October, $130,000.

The company applies manufacturing overhead cost to production using a predetermined rate of $5 per machine-hour. A total of 76,100 machine-hours were used in October.

Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.

Jobs that had cost $449,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 30% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $34,000.

Raw materials purchased on account, $210,000.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit a.

Record the raw materials issued to production, $190,000 ($152,000 direct materials and $38,000 indirect materials).

Note: Enter debits before credits.

	Transaction General Journal Debit Credit b.

Record the entry for accrued direct labor cost incurred, $48,000; indirect labor cost incurred, $21,000.

Note: Enter debits before credits.

Transaction General Journal Debit Credit c. Depreciation recorded on factory equipment, $105,000. Note: Enter debits before credits. Transaction General Journal Debit Credit d. Other manufacturing overhead costs accrued during October, $130,000. Note: Enter debits before credits. Transaction General Journal Debit Credit e. The company applies manufacturing overhead cost to production on the basis of $5 per machine-hour. A total of 76,100 machine-hours were recorded for October. Note: Enter debits before credits. Transaction General Journal Debit Credit f. Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods. Note: Enter debits before credits. Transaction General Journal Debit Credit g.

Record the cost of goods sold.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit h(1).

Record the sales on account.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit h(2).

Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $34,000.

	Manufacturing Overhead Work in Process Beg. Bal. End. Bal. End. Bal.

Answer 1

Journal Entry
Serial No.	Account Title & Explanations	Debit ($)	Credit ($)
a)	Raw material Inventory	210000
	Accounts payable		210000
b)	Work In Process	152000
	Manufacturing Overhead	38000
	Raw Material Inventory		190000
c)	Work In Process	48000
	Manufacturing overhead	21000
	Salary & Wages Payable		69000
d)	Manufacturing Overhead	105000
	Accumulated Depreciation		105000
	(depreciation on factory equipment recorded)
e)	Manufacturing overhead	130000
	Accounts Payable		130000
f)	Work in Process	380500
	Manufacturing overhead		380500
	(manufacturing overhead applied @$5 per hour for 76100 machine hours)
g)	Finished Goods	511000
	Work In Process		511000
	(job finished transferred to Finished goods account)
h)	Accounts Receivable	583700
	Sales		583000
	(Sales = 449000 * 130% = $583700 on account recorded)
	Cost of goods sold	449000
	Finished Goods		449000

WIP Account
date	Account	Amount	date	Account	Amount
	Balance c/f	34000	g)	Finished Goods	511000
b)	Raw Material Inventory	152000
c)	Cash - Direct Labour	48000
f)	Manufacturing Overhead	380500
				balance c/f	103500
		614500			614500

Manufacturing Overhead
date	Account	Amount	date	Account	Amount
b)	Raw masterial Inventory	38000	f)	Work In Process	380400
c)	Cash - indirect labour	21000
d)	Accumulated depreciation	105000
e)	Accounts payable	130000
	End Bal	86400
	( Overhead Overapplied)
		380400			380400