Question

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

Raw materials purchased on account, $210,000.

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

Accrued direct labor cost of $48,000 and indirect labor cost of $21,000.

Depreciation recorded on factory equipment, $104,000.

Other manufacturing overhead costs accrued during October, $130,000.

The company applies manufacturing overhead cost to production using a predetermined rate of $7 per machine-hour. A total of 76,400 machine-hours were used in October.

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

Jobs that had cost $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 40% 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				210,000
	accounts payable					210,000
b.	Work in process inventory				150,400
	manufacturing overhead				37,600
	Raw materials					188,000
c.	Work in process inventory				48,000
	manufacturing overhead				21,000
	Wages payable					69,000
d.	Manufacturing overhead				104,000
	Accumulated depreciation					104,000
e.	Manufacturing overhead				130,000
	Accounts payable					130,000
f.	Work in process inventory				534800
	manufacturing overhead					534,800
	(76,400*7)
g.	Finished goods				511,000
	Work in process inventory					511,000
h.	Cost of goods sold				450,000
	finished goods					450,000
	Accounts receivable				630000
	sales	(450000*140%)				630,000
	Manufacturing overhead
b.	37,600	f.	534,800
c.	21,000
d.	104,000
e.	130,000
		End bal	242,200
	Work In process inventory
Beg bal	35,000	g.	511,000
b.	150,400
c.	48,000
f.	534,800
end bal	257,200