Question

The Polaris Company uses a job-order costing system. The following data relate to October, the first month of the company’s fiscal year. a. Raw materials purchased on account, $210,000. b. Raw materials issued to production, $191,000 ($152,800 direct materials and $38,200 indirect materials). c. Direct labor cost incurred, $49,000; indirect labor cost incurred, $20,000. d. Depreciation recorded on factory equipment, $105,000. e. Other manufacturing overhead costs incurred during October, $130,000 (credit Accounts Payable). f. The company applies manufacturing overhead cost to production on the basis of $8 per machine-hour. A total of 76,300 machine-hours were recorded for October. g. Production orders costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Production orders that had cost $453,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 26% above cost.

Required: 1. Prepare journal entries to record the information given above

(1.a) Record the journal entry for purchase of raw material as given below:

(1.b) Journal entry for the issuance of material for production as given below:

(1.c) Journal entry for direct and indirect labor cost incurred as given below:

(1.d) Journal entry for recording depreciation as given below:

(1.e) Journal entry for manufacturing overheads incurred as given below:

1.f) Journalize the transaction of overheads absorbed as given below:

(1.g) Journal entry for finished goods as given below:

(1.h)Journal entry for finished goods available for sale as given below:

Answer 1

(1.a)

Raw Material Inventory - Debit $210,000
Accounts Payable - Credit $210,000

(Raw Material Purchased)

(1.b)

Work-in-progress - Debit $152,800
Inventory - Credit $152,800

(Direct Material issued to Production)

Manufacturing Overheads - Debit $38,200
Inventory - Credit $38,200

(In-direct Material issued to Production)

(1.c)

Work-in-progress - Debit $49,000
Cash - Credit $49,000

(Direct Labour cost incurred, assuming already paid)

Manufacturing Overheads - Debit $20,000
Cash - Credit $20,000

(In-direct Labour cost incurred, assuming already paid)

(1.d)

Manufacturing Overheads - Debit $105,000
Accumulated Depreciation - Credit $105,000

(Depreciation recorded on factory equipment)

(1.e)

Manufacturing Overheads - Debit $130,000
Accounts Payable - Credit $130,000

(Other Indirect cost incurred)

(1.f)

Work-in-progress - Debit $6,10,400
Manufacturing Overheads - Credit $6,10,400
(Manufacturing overhead charged to Job @ $8 per machine hour for total 76,300 machine hours worked)

(1.g)

Finished Good - Debit $511,000
Work-in-progress - Credit $511,000
(Production order completed & transferred to Finished goods)

(1.h)

Accounts Receivable - Debit $5,70,780
Revenue - Credit $5,70,780
(Revenue is recorded at 4,53,000 * 1.26)