Question

the following actual overhead costs for the month of June. Indirect materials $20,000 Indirect labor $18,000 Rent $ 3,000 Equipment depreciation $ 6,500 Overhead is applied based on a predetermined rate of $12 per machine hour, and 5,100 machine hours were used during June. Required: a. Prepare a journal entry to record actual overhead costs for June. Assume that labor costs will be paid next month and that rent was prepaid. b. Prepare a journal entry to record manufacturing overhead applied to jobs during June. c. Create a T-account for manufacturing overhead, post the appropriate information from parts a and b to this account, and calculate the ending balance. d. Is manufacturing overhead overapplied or underapplied? Using the balance in the manufacturing overhead account calculated in part c, prepare the journal entry to close manufacturing overhead to cost of goods sold.

Answer 1

a	Actual overhead cost for June
	1	Indirect material	Dr	20000
		Indirect Labour	Dr	18000
		Rent	Dr	3000
		Depreciation	Dr	6500
		Manufacturing Account	Cr	20000
		Provision for Indirect labour	Cr	18000
		Equipment Account	Cr	6500
		Prepaid Rent Account	Cr	3000
		(being Direct, prepaid and provision entries passed)
	2	Provision for Indirect labour	Dr	18000
		Equipment Account	Dr	6500
		Prepaid Rent Account	Dr	3000
		Manufacturing Account	Cr	27500
		(Being transferred to Manufacturing Account)
b	Manufacturing Overhead Entry
		Direct Labour charges	Dr	61200
		Manufacturing Overhead Accout	Cr	61200	(5100x12)
		(Being provison done for the payment of next month)
c		Cost of goods sold Account	Dr	108700
		Manufacturing Overhead Account	Cr	108700
		(Being transferred to COGS Accounts)

Manufacturing Overhead Account
Debtors	$	Creditors	$
Indirect material	20000	Cost of goods sold	108700
Provision for Indirect labour	18000
Equipment Account	6500
Prepaid Rent Account	3000
Direct Labour charges	61200
	108700		108700