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, $189,000 ($151,200 direct materials and $37,800 indirect materials).

Accrued direct labor cost of $49,000 and indirect labor cost of $20,000.

Depreciation recorded on factory equipment, $106,000.

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

The company applies manufacturing overhead cost to production using a predetermined rate of $6 per machine-hour. A total of 76,200 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 $452,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 28% 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 $36,000.

Answer 1

SOLUTION:

1) Journal entries:

	Particulars	Debit	Credit
a	Raw materials inventory	210,000
	Accounts payable		210,000
b	Work in process	189,000
	Manufacturing overhead		151,200
	Raw materials inventory		37,800
c	Work in process	49,000
	Manufacturing overhead	20,000
	Salaries and wages payable		69,000
d	Manufacturing overhead	106,000
	Accumulated depreciation		106,000
e	Manufacturing overhead	130,000
	Accounts payable		130,000
f	Work in process	457,200
	Manufacturing overhead		457,200
g	Finished goods	511,000
	Work in process		511,000
h	Accounts receivable	578,560
	Sales		578,560
i	Cost of goods sold	452,000
	Finished goods		452,000

2)

Manufacturing overhead

(b)	37,800	(f)	457,200
(c )	20,000
(d)	106,000
(e )	130,000
		Ending balance	163,400

Work in Process

Beginning balance	36,000	(g)	511,000
(b)	151,200
(c )	49,000
(f)	457,200
Ending balance	182,400