Question

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

Purchased $119,000 of materials on account.

Issued $117,600 in direct materials to the production department.

Issued $8,400 of supplies from the materials inventory.

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

Returned $15,400 of the materials issued to production in (2) to the materials inventory.

Direct labor employees earned $217,000, which was paid in cash.

Purchased miscellaneous items for the manufacturing plant for $120,400 on account.

Recognized depreciation on manufacturing plant of $245,000.

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 $3,000,000. Estimated overhead for the year was $2,790,000. The following balances appeared in the inventory accounts of Forest Components for July.

Beginning Ending Materials Inventory beginning: ? ending: $88,200

Work-in-Process Inventory beginning: ? ending: 73,500

Finished Goods Inventory beginning: $18,200 ending: 49,700

Cost of Goods Sold beignning: ? ending: 521,500

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
2,790,000/3,000,000
93%
TR	General journal				Debit	Credit
1)	Raw materials inventory				119,000
	Accounts payable					119,000
2)	Work in process inventory				117,600
	Raw materials inventory					117,600
3)	manufacturing overhead				8,400
	Raw materials inventory					8,400
4)	Accounts payable				119,000
	cash					119,000
5)	Raw materials inventory				15,400
	work in process inventory					15,400
6)	work in process inventory				217,000
	cash					217,000
7)	manufacturing overhead				120,400
	Accounts payable					120,400
8)	Manufacturing overhead				245,000
	Accumulated depreciation					245,000
9)	work in process inventory				201810
	applied Manufacturing overhead					201,810
Materials inventory
Beg.Bal	79,800				Work in process inventory
1)	119,000	117,600	2)		beg .bal	105,490
5)	15,400	8,400	3)		2)	117,600	15,400	5)
					6)	217,000	553,000	Trfd to finished
					9)	201810		goods
end bal	88,200
					End bal	73,500
Manufacturing overhead control					Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	8,400						201810	9)
7)	120,400
8)	245,000
End bal	373800				end bal		201810
Accounts payable					Cash
Beg.Bal		0			Beg.Bal	0
4)	119,000	119,000	1)				119,000	4)
		120,400	7)				217,000	6)
End bal		120,400			End bal		336,000
Accumulated Depreciation -PP&E					finished goods inventory
Beg.bal		0			Beg bal	18,200
		245,000	8)		goods com	553,000	521,500	Trfd to COGS
End bal		245000			end bal	49,700
cost of goods sold
Beg.Bal	0
Goods comp	521,500
End bal	521500