Question

In: Accounting

Riverwards Inc. is a small company that manufactures irrigation systems. The line workers earn $32/hour. The...

Riverwards Inc. is a small company that manufactures irrigation systems. The line workers earn $32/hour. The company uses job order costing and applies manufacturing overhead on the basis of labor hours. At the beginning of the month, the following estimates were made:

Estimated Manufacturing Overhead Costs -              $261,000

Estimated Direct Labor Hours -                                          900

Beginning balances for inventory accounts were as follows:

            Raw Materials -                                   $30,000

            Work in Process -                                $41,000 Job 1311

            Finished Goods -                                $150,000 Job 1310

The following transactions took place during the month (all purchases and services were acquired on account):

  1. $255,000 in raw materials were purchased
  2. Direct materials were requisitioned for use in Job 1312, $55,000.
  3. Direct materials were requisitioned for use in Job 1313, $80,000.
  4. Headquarters incurred $35,000 in utility bills.
  5. The factory incurred $15,000 in utility bills.
  6. The record for Job 1311 indicated that 280 labor hours were used.
  7. The record for Job 1312 indicated that 375 labor hours were used.
  8. The record for Job 1313 indicated that 390 labor hours were used.
  9. Jobs 1311 and 1312 were completed during the month.
  10. Job 1310 and 1312 were sold during the month for $800,000.
  11. Headquarters’ janitorial salaries for the month were $5,000.
  12. The factory managers’ salaries totaled $160,000.
  13. Indirect materials requisitioned totaled $35,000.
  14. $100,000 of depreciation on the factory equipment was accrued this month.
  15. Advertising costs for the month were $65,000.
  16. -
  17. Use MS Excel to show t-accounts or journal entries (your choice) to record the previous transactions. Also answer the following 5 questions in the spreadsheet. Then upload the file.

Solutions

Expert Solution

Predetermined overhead rate = $ 261,000 / 900 = $ 290 per DLH

In the books of Riverwards Inc. :

Transaction / Event Account Titles Debit Credit
$ $
1. Raw Materials 255,000
Accounts Payable 255,000
2. Work in Process: 1312 55,000
Work in Process:1313 80,000
Raw Materials 135,000
3. Utilities Expense 35,000
Accounts Payable 35,000
4. Factory Overhead 15,000
Accounts Payable 15,000
5. Work in Process: 1311 ( 280 DLH @ $ 32) 8,960
Work in Process: 1312 ( 375 DLH @ $ 32 ) 12,000
Work in Process: 1313 ( 390 DLH @ $ 32) 12,480
Factory Wages Payable 33,440
6. Work in Process: 1311 ( 290 x 280 DLH ) 81,200
Work in Process: 1312 ( 290 x 375 DLH) 108,750
Work in Process: 1313 ( 290 x 390 DLH ) 113,100
Factory Overhead 303,050
7. Finished Goods Inventory 306,910
Work in Process: 1311 131,160
Work in Process: 1312 175,750
8. Accounts Receivable 800,000
Sales 800,000
9. Cost of Goods Sold ( 150,000 + 175,750) 325,750
Finished Goods 325,750
10. Salaries and Wages Expense 5,000
Salaries and Wages Payable 5,000
11. Factory Overhead 160,000
Salaries and Wages Payable 160,000
12. Factory Overhead 35,000
Raw Materials 35,000
13. Factory Overhead 100,000
Accumulated Depreciation: Equipment 100,000
14. Advertising Expense 65,000
Accounts Payable 65,000

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