A. Raw materials purchased on account, $209,000. b. Raw materials used in production, $191,000 ($152,800 direct materials and $38,200 indirect materials).
c. Accrued direct labor cost of $48,000 and indirect labor cost of $20,000.
d. Depreciation recorded on factory equipment, $106,000.
e. Other manufacturing overhead costs accrued during October, $131,000.
f. The company applies manufacturing overhead cost to production using a predetermined rate of $5 per machine-hour. A total of 76,100 machine-hours were used in October.
g. Jobs costing $515,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
h. Jobs that had cost $451,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 38% 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.

1. Journal Entries

a.

Debit Raw materials $209,000

Credit Accounts Payable $209,000

To record the purchase of raw materials on account.

b.

Debit Work in Process $152,800

Debit Manufacturing Overhead $38,200

Credit Raw materials $191,000

To record raw materials used in production as direct and indirect materials respectively.

c.

Debit Work in Process $48,000

Debit Manufacturing Overhead $20,000

To record direct and indirect labor costs.

d.

Debit Manufacturing Overhead $106,000

Credit Depreciation Expense-Equipment $106,000

To record depreciation on factory equipment.

e.

Debit Manufacturing Overhead $131,000

Credit Expenses Payable $131,000

To accrue other manufacturing overhead costs.

f.

Debit Work in Process $380,500

Credit Manufacturing Overhead $380,500

To apply manufacturing overhead cost to production.

g.

Debit Finished Goods Inventory $515,000

Credit Work in Process $515,000

To transfer goods to finished goods inventory.

h.

Debit Cost of Goods Sold $451,000

Credit Finished Goods Inventory $451,000

To record the cost of goods sold.

Debit Accounts Receivable $622,380

Credit Sales Revenue $622,380

To record the sale of goods on account at 38% above cost.

2. T-accounts for Manufacturing Overhead and Work in Process

Manufacturing Overhead

Account Title              Debit        Credit

Raw materials           $38,200

Indirect labor cost      20,000

Depreciation-Equip. 106,000

Other costs               131,000

Work in Process                       $380,500

Ending balance        85,300

Work in Process

Account Title              Debit        Credit

Beginning Balance $35,000

Raw materials          152,800

Direct labor cost       48,000

Manuf. Overhead   380,500

Finished Goods                        $515,000

Ending Balance                          101,300

Explanation:

Manufacturing overhead applied = 76,100 * $5 = $380,500

Manufacturing overhead overapplied = $85,300

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