Question

Ialani Corpuses a job order costing system for the yachts it constructs. On September 1, 2013, the company had the following account balances:

Raw Material Inventory	$ 332,400
Work in Process Inventory	1,512,600
Cost of Goods Sold	4,864,000

On September 1, the three jobs in Work in Process Inventory had the following balances:

Job #75	$586,400
Job #78	266,600
Job #82	659,600

The following transactions occurred during September: Sept. 1 Purchased $1,940,000 of raw material on account.

Sept. 1	Purchased $1,940,000 of raw material on account.
4	Issued $1,900,000 of raw material as follows: Job #75, $289,600; Job #78, $252,600; Job #82, $992,200; Job #86, $312,400; and indirect material, $53,200.
15	Prepared and paid the $757,000 factory payroll for September 1–15. Analysis of this payroll showed the following information:
	Job #75	9,660 hours			$ 84,600
	Job #78	26,320 hours			267,200
	Job #82	20,300 hours			203,000
	Job #86	10,280 hours			110,800
	Indirect labor wages				91,400
15	On each payroll date, Ialani Corp. applies manufacturing overhead to jobs at a rate of $12.50 per direct labor hour.
15	Job #75 was completed, accepted by the customer, and billed at a selling price of cost plus 30 percent. Selling prices are rounded to the nearest whole dollar.
20	Paid the following monthly factory bills: utilities, $39,600; rent, $70,600; and accounts payable (accrued in August), $196,800.
24	Purchased raw material on account, $624,000.
25	Issued $772,200 of raw material as follows: Job #78, $154,800; Job #82, $212,600; Job #86, $349,000; and indirect material, $55,800.
30	Recorded additional factory overhead costs as follows: depreciation, $809,000; expired prepaid insurance, $165,400; and accrued taxes and licenses, $232,400.
30	Recorded and paid the factory payroll for September 16–30 of $714,400. Analysis of the payroll follows:
	Job #78		8,940 hours	$177,400
	Job #82		13,650 hours	228,400
	Job #86		9,980 hours	243,600
	Indirect labor wages			65,000
30	Applied overhead for the second half of the month to jobs.

a. Journalize the September transactions.

b. Use T-accounts to post the information from the journal entries in (a) to the job cost subsidiary accounts and to general ledger accounts.

c. Reconcile the September 30 balances in the subsidiary ledger with the Work in Process Inventory account in the general ledger.

d. Determine the amount of underapplied or overapplied overhead for September.

Answer 1

a.

Lalani Corp.
General Journal for the month of September 2013
Date	Account Title	Debit	Credit
Sept.1	Raw material	1940000
	Accounts Payable		1940000
	(Purchase of raw material on account)
Sept.4	Work-in-process	1846800
	Manufacturing Overhead	53200
	Raw material		1900000
	(Issue of raw material for production)
Sept.15	Work-in-process	665600
	Manufacturing Overhead	91400
	Wages Expense		757000
	(Wages paid for Sept.1-15 period)
Sept.15	Work-in-process	832000
	Manufacturing Overhead		832000
	(Application of overhead at $12.50 per hour)
Sept.15	Finished Goods	1081350
	Work-in-process		1081350
	(Completed Job#75 transferred to finished goods)
Sept.15	Accounts receivable	1405755
	Sales		1405755
	(Sale of Job#75 at cost plus 30%)
	Cost of goods sold	1081350
	Finished Goods		1081350
	(Cost of Job#75 accounted)
Sept.20	Utilities Expense	39600
	Rent expense	70600
	Accounts Payable	196800
	Cash		307000
	(Payments made for expenses)
	Manufacturing Overhead	110200
	Utilities Expense		39600
	Rent expense		70600
	(Factory expenses transferred to manufacturing overhead)
Sept.24	Raw material	624000
	Accounts Payable		624000
	(Purchase of raw material on account)
Sept.25	Work-in-process	716400
	Manufacturing Overhead	55800
	Raw material		772200
	(Issue of raw material for production)
Sept.30	Depreciation Expense	809000
	Insurance Expense	165400
	Taxes and licenses Expense	232400
	Accumulated Depreciation		809000
	Prepaid Insurance		165400
	Taxes and licenses Payable		232400
	(Recorded expenses)
	Manufacturing Overhead	1206800
	Depreciation Expense		809000
	Insurance Expense		165400
	Taxes and licenses Expense		232400
Sept.30	Work-in-process	649400
	Manufacturing Overhead	65000
	Wages Expense		714400
	(Wages paid for Sept.1-15 period)
Sept.30	Work-in-process	407125
	Manufacturing Overhead		407125
	(Application of overhead at $12.50 per hour)

b.

General Ledger
Raw Material					Manufacturing overhead
Date	Debit	Date	Credit		Date	Debit	Date	Credit
Beg.Bal.	332400	Sept.4	1900000		Sept.4	53200	Sept.15	832000
Sept.1	1940000	Sept.25	772200		Sept.15	91400	Sept.30	407125
Sept.24	624000				Sept.20	110200
					Sept.25	55800
					Sept.30	1206800
					Sept.30	65000
						1582400		1239125
Work in process					Finished goods sold
Date	Debit	Date	Credit		Date	Debit	Date	Credit
Beg.Bal.	1512600	Sept.15	1081350		Sept.15	1081350	Sept.15	1081350
Sept.4	1846800
Sept.15	665600
Sept.15	832000
Sept.25	716400				Cost of Goods Sold
Sept.30	649400				Date	Debit	Date	Credit
Sept.30	407125				Beg.Bal.	4864000
	6629925		1081350		Sept.15	1081350
End.Bal.	5548575

Job Cost Accounts
Job # 75
Date	Debit	Date	Credit
Beg.Bal.	586400	Sept.15	1081350
Sept.4	289600
Sept.15	84600
Sept.15	120750
	1081350		1081350
Job # 78
Date	Debit	Date	Credit
Beg.Bal.	266600
Sept.4	252600
Sept.15	267200
Sept.15	329000
Sept.25	154800
Sept.30	177400
Sept.30	111750
	1559350
Job # 82
Date	Debit	Date	Credit
Beg.Bal.	659600
Sept.4	992200
Sept.15	203000
Sept.15	253750
Sept.25	212600
Sept.30	228400
Sept.30	170625
	2720175
Job # 86
Date	Debit	Date	Credit
Sept.4	312400
Sept.15	110800
Sept.15	128500
Sept.25	349000
Sept.30	243600
Sept.30	124750
	1269050

c.

Work-in-process
Job. No.	Amount
78	1559350
82	2720175
86	1269050
Total	5548575

d.

Overhead incurred			1582400
Overhead applied			1239125
Underapplied overhead			343275