Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October: Raw materials purchased on account, $209,000. Raw materials used in production, $192,000 ($153,600 direct materials and $38,400 indirect materials). Accrued direct labor cost of $50,000 and indirect labor cost of $21,000. Depreciation recorded on factory equipment, $105,000. Other manufacturing overhead costs accrued during October, $129,000. The company applies manufacturing overhead cost to production using a predetermined rate of $6 per machine-hour. A total of 76,000 machine-hours were used in October. Jobs costing $514,000 according to their job cost sheets were completed during October and transferred to Finished Goods. Jobs that had cost $452,000 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.

Answer 1

1)

Journal Entries for Job Costing:
S.No	Account name	Debit($)	Credit($)
1	Raw Materials Inventory	209000
	Accounts Payable		209000
	(Raw materials purchased on Credit)
2	Work In Process Inventory	153600
	Raw Materials Inventory		153600
	(Record direct materials Consumed for production)
3	Manufacturing Overhead	38400
	Raw Materials Inventory		38400
	(Record In direct materials Consumed for production)
4	Work In Process Inventory	50000
	Direct Labour		50000
	(Record direct Labour used for production)
5	Manufacturing Overhead	21000
	In direct Labour		21000
	(Record In direct Labour used for production)
6	Work In Process Inventory	456000
	Manufacturing Overhead		456000
	(Record Overheads Applied)
7	Finished Goods Inventory	514000
	Work In Process Inventory		514000
	(Record Completion of Job)
8	Accounts Receivable	587600
	Sales		587600
	(Record Job Sales on Account)
9	Cost of goods sold	452000
	Finished Goods Inventory		452000
	(Cost of goods sold transferred to Finished Goods)
10	Manufacturing Overhead	234000
	Accounts payable		129000
	Accumulated Depreciation		105000
	(Actual Overhead Cost incurred)

		Manufacturing Overhead
InDirect Materials		38400	WIP Inventory		456000
InDirect Labour		21000
Accounts Payable		129000
Acc.Depreciation		105000
Closing Balance		162600
Total		456000	Total		456000
		Work in Process Inventory
Opening Inventory		34000	Finished Goods		514000
Direct Materials		153600
Direct Labour		50000
Manufacturing OH		456000
			Closing Balance		179600
Total		693600	Total		693600
		Raw Material Inventory
Accounts Payable		209000	Work Process		153600
			Manufacturing OH		38400
			Closing Balance		17000
Total		209000	Total		209000