Question

The Polaris Company uses a job-Exercise 3-5 Journal Entries and T-accounts [LO3-1, LO3-2] The Polaris Company uses a job-order costing system. The following transactions occurred in October:order costing system. The following transactions occurred in October:

a. Raw materials purchased on account, $210,000.
b. Raw materials used in production, $189,000 ($151,200 direct materials and $37,800 indirect materials).
c. Accrued direct labor cost of $49,000 and indirect labor cost of $20,000.
d. Depreciation recorded on factory equipment, $106,000.
e. Other manufacturing overhead costs accrued during October, $130,000.
f. The company applies manufacturing overhead cost to production using a predetermined rate of $8 per machine-hour. A total of 76,400 machine-hours were used in October.
g. Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
h. 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 34% above cost.

Required:
a. Prepare journal entries to record the transactions given above.
b. 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

Answer:

Required a

a.

Raw Materials $210,000 (debit)

Account Payable $210,000 (credit)

b.

Work In Process : Direct Materials $151,200 (debit)

Work In Process : Indirect Materials $37,800 (credit)

Raw Materials $189,000  (credit)

c.

Work In Process : Direct Labor $49,000 (debit)

Work In Process : Indirect Labor $20,000 (credit)

Salaries Payable $69,000  (credit)

d.

Work In Process : Depreciation $106,000 (debit)

Accumulated Depreciation $106,000(credit)

e.

Manufacturing Overheads $130,000 (debit)

Accounts Payable $130,000 (credit)

f.

Work In Process $611,200 (debit)

Manufacturing Overheads $611,200 (credit)

g.

Finished Goods Inventory $511,000 (debit)

Work In Process $511,000 (credit)

h.

Accounts Receivable $605,680 (debit)

Cost of Goods Sold $452,000 (debit)

Sales Revenue $605,680 (credit)

Finished Goods Inventory $452,000 (credit)

Required b.

Manufacturing Overhead T- Account

Debit :

Indirect Materials      $37,800

Indirect Labor           $20,000

Depreciation            $106,000

Accounts Payable   $130,000

Over-Applied           $317,400

Totals                        $611,200

Credit :

Work In Process      $611,200

Totals                        $611,200

Totals

Work in Process T- Account

Debit :

Opening Balance                                    $36,000

Direct Materials                                      $151,200

Direct Labor                                            $49,000

Manufacturing Overheads                     $611,200

Totals                                                     $847,400

Credit :

Finished Goods Inventory                    $511,000

Closing Balance                                   $336,400

Totals                                                     $847,400

Explanation:

Manufacturing Cost Accumulate in the Work In Process Account.

When Goods are completed the cost is De-recognized from Work In Process Account to Finished Goods Inventory Account.

It is from this Finished Goods Inventory Account that Cost of Sales for Goods Sold are determined.