Question

In: Accounting

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers....

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments:

      The following incomplete Work in Process account is available for the Refining Department for March:

Work in Process—Refining Department
  March 1 balance 34,000     Completed and transferred
       to Blending
?       
  Materials 141,600     
  Direct labor 70,200     
  Overhead 486,000  
  March 31 balance ?       

     The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,000; direct labor, $4,700; and overhead, $21,300.

     Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $17,600; and overhead cost applied to production, $102,000.

Required:
1.

Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

a. Raw materials were issued for use in production.
b. Direct labor costs were incurred.
c.

Manufacturing overhead costs for the entire factory were incurred, $636,000. (Credit Accounts Payable.)

d. Manufacturing overhead cost was applied to production using a predetermined overhead rate.
e.

Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $682,000.

f.

Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $720,000.

g. Completed units were sold on account, $1,450,000. The Cost of Goods Sold was $660,000.
2.

Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Refining Department’s Work in Process account is given on the prior page.)

  Raw materials $ 210,600
  Work in process—Blending Department $ 53,000
  Finished goods $ 20,000

After posting the entries to the T-accounts, find the ending balance in the inventory accounts and the manufacturing overhead account.

Solutions

Expert Solution

1.

Transactions General Journal Debit Credit
a. Work in process-Refining department 141600
Work in process-Blending department 46000
Raw Materials 187600
(To record direct materials used in production)
b. Work in process-Refining department 70200
Work in process-Blending department 17600
Salaries and Wages payable 87800
(To record direct labor costs incurred)
c. Manufacturing overhead 636000
Accounts Payable 636000
(To record manufacturing overhead incurred)
d. Work in process-Refining department 486000
Work in process-Blending department 102000
Manufacturing overhead 588000
(To record manufacturing overhead applied)
e. Work in process-Blending department 682000
Work in process-Refining department 682000
(To record transfers from Refining to Blending department)
f. Finished goods 720000
Work in process-Blending department 720000
(To record goods completed and transferred to finished goods)
g.(1) Accounts receivable 1450000
Sales 1450000
(To record sales on account)
g.(2) Cost of goods sold 660000
Finished goods 660000
(To record cost of sales)

2.

Accounts Receivable Raw Materials
Debit Credit Debit Credit
g.(1) 1450000 Beg. Bal. 210600
187600 a.
End. Bal. 1450000 End. Bal. 23000
Work in Process-Refining Department Work in Process-Blending Department
Debit Credit Debit Credit
Beg. Bal. 34000 Beg. Bal. 53000
a. 141600 682000 e. a. 46000 720000 f.
b. 70200 b. 17600
d. 486000 d. 102000
e. 682000
End. Bal. 49800 End. Bal. 180600
Finished Goods Manufacturing Overhead
Debit Credit Debit Credit
Beg. Bal. 20000 c. 636000 588000 d.
f. 720000 660000 g.(2)
End. Bal. 80000 End. Bal. 48000
Accounts Payable Salaries and Wages Payable
Debit Credit Debit Credit
636000 c. 87800 b.
End. Bal. 636000 End. Bal. 87800
Sales Cost of Goods Sold (COGS)
Debit Credit Debit Credit
1450000 g.(1) g.(2) 660000
End. Bal. 1450000 End. Bal. 660000

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