Question

Ashley Manufacturing Company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700. Each year’s premium is an equal portion of the total payment and is paid at the beginning of each year. Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first yearof coverage?

Product Period

A: 2,700 0

B: 2,160 540

C: 1,440 360

D: 720 180

A. Option A
B. Option B
C. Option C
D. Option D

Walker Corporation uses process costing. A number of transactions that occurred in June are listed below.

(1) Raw materials that cost $38,200 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials.
(2) Direct labor costs of $36,500 are incurred, but not yet paid, in the Mixing Department.
(3) Manufacturing overhead of $42,100 is applied in the Mixing Department using the department's predetermined overhead rate.
(4) Units with a carrying cost of $112,400 finish processing in the Mixing Department and are transferred to the Drying Department for further processing.
(5) Units with a carrying cost of $143,800 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse.
(6) Finished goods with a carrying cost of $138,500 are sold.

Required:

Prepare journal entries for each of the transactions listed above.
   

Answer 1

Q1.
Answer is D. Option D
Explanation:
Total Insurance for 3 yrs			2700
Annual premiumt			900
	(2700/3)
manufacturing OH (900*80%)			720
Selling and admin Oh (900*20%)			180
Q2.
Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
1	Work in process -Mixing				38200
	Raw material inventory					38200
2	Work in process -Mixing				36500
	Factory wages payable					36500
3	Work in process -Mixing				42100
	Manufacturing Overheads					42100
4	Work in process-Drying				112400
	Work in process-Mixing					112400
5	Finished Goods				143800
	Work in process-Drying					143800
6	Cost of goods sold				138500
	Finished Goods inventory					138500