Marcelino Co.'s March 31 inventory of raw materials is $80,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $363,000. Overhead costs incurred in April are indirect materials, $50,000; Indirect labor, $23,000; factory rent $32,000; factory utilities, $19,000; and factory equipment depreciation, $51,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 cahs in April. Costs of the three jobs worked on in April follow:

Job 307 Job 307 Job 308
Balances on March 31
Direct materials $29,000 $35,000
Direct labor 20,000 18,000
Applied overhead 10,000 9,000
Costs during April
Direct materials 135,000 220,000 $100,000
Direct labor 85,000 150,000 105,000
Applied overhead
Status on April 30 Finished (sold) Finished (unsold) In process

a. Materials purchases on credit
b. Direct materials used in production
c. Direct labor paid and assigned to Factory Overhead
d. Indirect labor paid and assigned to Factory Overhead
e. Overhead costs applied to Work In Process Inventory
f. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash)
g. Transfer of Jobs 306 and 307 to Finished Goods Inventory
h. Cost of goods sold for Job 306
i. Revenue from the sale of Job 306
j. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account, (the amount is not material).

Required:
Prepare journal entries for the month of April to record the above transactions.

Marcelino Co.

Journal Entries:

Debit Raw materials $500,000

Credit Accounts Payable $500,000

To record the purchase of raw materials on credit.

Debit Factory payroll $363,000

Credit Cash $363,000

To record payment for factory payroll.

Debit Work in Process:

Job 307 $135,000

Job 307 $220,000  

Job 308  $100,000

Credit Raw materials $455,000

To record direct materials used in production

Debit Work in Process:

Job 307 $42,500

Job 307 $75,000  

Job 308  $52,500

Credit Factory overhead $170,000

To record overhead applied.

Debit Factory overhead  $175,000

Credit Raw materials $50,000

          Factory payroll $23,000

          Factory rent $32,000

          Factory utilities $19,000

          Factory equipment depreciation $51,000

To record actual factory overhead costs.

Debit Finished Goods Inventory $828,500

Credit Work in Process:

Job 306 $321,500

Job 307 $507,000

To record the cost of finished goods transferred.

Debit Cost of goods sold $321,500

Credit Finished goods inventory $321,500

To record the cost of goods sold.

Debit Cash $635,000

Credit Sales Revenue $635,000

To record the receipt of cash for sales.

Debit Cost of Goods Sold $5,000

Credit Factory overhead $5,000

To record underapplied overhead.

Explanation:

a) Data and Calculations:

Raw materials inventory, March 31 = $80,000

Raw materials $500,000 Accounts Payable $500,000

Factory payroll $363,000 Cash $363,000

Overhead costs incurred in April :

Indirect materials  $50,000 Raw materials $50,000

Indirect labor $23,000 Factory payroll $23,000

Factory rent $32,000 Cash $32,000

Factory utilities $19,000 Cash $19,000

Factory equipment depreciation $51,000 Accumulated depreciation $51,000

Total overhead incurred = $175,000

Predetermined overhead rate = 50% of direct labor cost

Sale of Job 306 for cash = $635,000

                                 Job 306          Job 307          Job 308             Total

Balances on March 31

Direct materials       $29,000          $35,000                                $64,000

Direct labor                20,000             18,000                                   38,000

Applied overhead      10,000              9,000                                    19,000

Costs during April

Direct materials       135,000          220,000          $100,000    $455,000

Direct labor               85,000           150,000            105,000       340,000

Applied overhead    42,500             75,000              52,500       170,000

Total costs            $321,500        $507,000          $257,500 $1,086,000

Status on April 30 Finished (sold) Finished (unsold) In process

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