Question

Forest Components makes aircraft parts. The following transactions occurred in July.

1. Purchased $16,990 of materials on account.

2. Issued $16,720 in direct materials to the production department.

3. Issued $1,320 of supplies from the materials inventory.

4. Paid for the materials purchased in transaction (1) using cash.

5. Returned $2,010 of the materials issued to production in (2) to the materials inventory.

6. Direct labor employees earned $31,500, which was paid in cash.

7. Purchased miscellaneous items for the manufacturing plant for $17,350 on account.

8. Recognized depreciation on manufacturing plant of $36,200.

9. Applied manufacturing overhead for the month.

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $434,900. Estimated overhead for the year was $408,806.

The following balances appeared in the inventory accounts of Forest Components for July.

	Beginning			Ending
Materials Inventory		?		$	12,590
Work-in-Process Inventory		?			10,520
Finished Goods Inventory	$	2,740			7,020
Cost of Goods Sold		?			74,800

Required:

a. Prepare journal entries to record these transactions.

b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Answer 1

Answer:

predeternined overhead rate
estimated overhead/estimated direct labor costs
408806/434900
94%
TR	General journal			Debit	Credit
1)	Raw materials inventory		16990
	Accounts payable				16990
2)	Work in process inventory		16720
	Raw materials inventory			16720
3)	manufacturing overhead		1320
	Raw materials inventory			1320
4)	Accounts payable			16990
	cash					16990
5)	Raw materials inventory		2010
	work in process inventory			2010
6)	work in process inventory		31500
	cash					31500
7)	manufacturing overhead		17350
	Accounts payable				17350
8)	Manufacturing overhead		36200
	Accumulated depreciation			36200
9)	work in process inventory		29610
	applied Manufacturing overhead		29610
	(31500*94%)
Materials inventory
Beg.Bal	11630				Work in process inventory
1)	16990	16720	2)		beg .bal	13780
5)	2010	1320	3)		2)	16720	2010	5)
					6)	31500	79080	Trfd to finished
					9)	29610		goods
end bal	12590
					End bal	10520
Manufacturing overhead control		Applied manufacturing overhead
Beg.bal	0				Beg.Bal		0
3)	1320						29610	9)
7)	17350
8)	36200
End bal	54870				end bal		29610
Accounts payable				Cash
Beg.Bal		0			Beg.Bal	0
4)	16990	16990	1)				16990	4)
		17350	7)				31500	6)
End bal		17350			End bal		48490
Accumulated Depreciation -PP&E		finished goods inventory
Beg.bal		0			Beg bal	2740
		36200	8)		goods com	79080	74800	Trfd to COGS
End bal		36200			end bal	7020
cost of goods sold
Beg.Bal	0
Goods comp	74800
End bal	74800