Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

a.Raw materials purchased on account, $209,000.

b.Raw materials used in production, $188,000 ($150,400 direct materials and $37,600 indirect materials).

c.Accrued direct labor cost of $50,000 and indirect labor cost of $20,000.

d.Depreciation recorded on factory equipment, $105,000.

e.Other manufacturing overhead costs accrued during October, $129,000.

f.The company applies manufacturing overhead cost to production using a predetermined rate of $5 per machine-hour. A total of 76,500 machine-hours were used in October.

g.Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.

h.Jobs that had cost $448,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 36% 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 $35,000.

Answer 1

	Journal entries
	No	General journal				Debit	Credit
	a.	Raw materials				209,000
		accounts payable					209,000
	b.	Work in process inventory				150,400
		manufacturing overhead				37,600
		Raw materials					188,000
	c.	Work in process inventory				50,000
		manufacturing overhead				20,000
		Wages payable					70,000
	d.	Manufacturing overhead				105,000
		Accumulated depreciation					105,000
	e.	Manufacturing overhead				129,000
		Accounts payable					129,000
	f.	Work in process inventory				382500
		manufacturing overhead					382,500
	g.	Finished goods				511,000
		Work in process inventory					511,000
	h.	Cost of goods sold				448,000
		finished goods					448,000
		Accounts receivable				609280
		sales	(448000*136%)				609,280
		Manufacturing overhead
	b.	37,600	f.	382,500
	c.	20,000
	d.	105,000
	e.	129,000
			End bal	90,900
		Work In process inventory
	Beg bal	35,000	g.	511,000
	b.	150,400
	c.	50,000
	f.	382,500
	end bal	106,900