Question

Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $6,500, direct labor of $4,400, and applied overhead of $3,740. Custom Cabinetry applies overhead at the rate of 85% of direct labor cost. During July, Job 120 is sold (on account) for $22,500, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.

July Product Costs	Job 120			Job 121			Job 122			Total
Direct materials	$	2,600		$	6,300		$	3,300		$	12,200
Direct labor		3,100			4,600			2,600			10,300
Overhead applied		?			?			?			?

1. Prepare journal entries for the following in July.

Direct materials used in production.

Direct labor used in production.

Overhead applied.

The sale of Job 120.

Cost of goods sold for Job 120.

2. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory general ledger accounts. (Assume there are no jobs in Finished Goods Inventory as of June 30.)

Answer 1

Cost sheet
			Job 120	Job 121	Job 122	Total
Beginning Cost			14640
Current cost:
Material			2600	6300	3300	12200
Labor			3100	4600	2600	10300
Oh applied @ 85% of labour cost			2635	3910	2210	8755
Total cost			22975	14810	8110	31255
Status			SOLD	FINISHED	WIP
Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
1	Work in process Inventory Account Dr.				12200
	Raw material Inventory					12200
2	Work in Process Inventory Account Dr.				10300
	Wages payable					10300
3	Work in Process Inventory Account Dr.				8755
	Manufacturing Overehads					8755
4	Accounts receivable Account Dr.				22500
	Sales revenue					22500
	Cost of Goods sold Account Dr.				22975
	Finished Goods Account					22975
Balance of WIP and Finished Goods:
Finished Goods (Job 121):			14810
Work in process (Job 122):			8110