Edwin Parts, a job shop, recorded the following transactions in May: Purchased $87,200 in materials on account. Issued $3,650 in supplies from the materials inventory to the production department. Issued $43,600 in direct materials to the production department. Paid for the materials purchased in transaction (1). Incurred wage costs of $67,200, which were debited to Payroll, a temporary account. Of this amount, $22,300 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $44,900 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll. Recognized $34,700 in fringe benefit costs, incurred as a result of the wages paid in (5). This $34,700 was debited to Payroll and credited to Fringe Benefits Payable. Analyzed the Payroll account and determined that 65 percent represented direct labor; 15 percent, indirect manufacturing labor; and 20 percent, administrative and marketing costs. Applied overhead on the basis of 140 percent of direct labor costs. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $41,300. Recognized depreciation of $26,300 on manufacturing property, plant, and equipment. Required: Prepare journal entries to record these transactions. The balances that appeared in the accounts of Edwin Parts are shown as follows.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Edwin Parts, a job shop, recorded the following transactions in May:

Purchased $87,200 in materials on account.
Issued $3,650 in supplies from the materials inventory to the production department.
Issued $43,600 in direct materials to the production department.
Paid for the materials purchased in transaction (1).
Incurred wage costs of $67,200, which were debited to Payroll, a temporary account. Of this amount, $22,300 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $44,900 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll.
Recognized $34,700 in fringe benefit costs, incurred as a result of the wages paid in (5). This $34,700 was debited to Payroll and credited to Fringe Benefits Payable.
Analyzed the Payroll account and determined that 65 percent represented direct labor; 15 percent, indirect manufacturing labor; and 20 percent, administrative and marketing costs.
Applied overhead on the basis of 140 percent of direct labor costs.
Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $41,300.
Recognized depreciation of $26,300 on manufacturing property, plant, and equipment.

Required:

Prepare journal entries to record these transactions.
The balances that appeared in the accounts of Edwin Parts are shown as follows.

Prepare T-accounts to show the flow of costs during the period.
Materials Inventory
Beginning Balance
Ending Balance
Debit
Ending Balance
Manufacturing Overhead Control
Debit
Beginning Balance
Credit
Credit
Beginning Balance
Ending Balance
Debit
Ending Balance
Debit
Beginning Balance
Work-in-Process Inventory
Credit
Goods Completed
Applied Manufacturing Overhead
Credit

Beginning Balance
Ending Balance
Debit
Ending Balance
Debit
Beginning Balance
Accounts Payable
Payroll
Credit
Credit
Beginning Balance
Ending Balance
Debit
Ending Balance
Debit
Beginning Balance
Cash
Payroll Taxes Payable
Credit
Credit

Definition Definition Benefits in addition to compensation that companies give to their employees. Fringe benefits can boost morale and productivity and keep employees motivated. Companies often use fringe benefits as a competitive advantage to recruit and retain employees. Examples of fringe benefits include pensions, vacation time, tuition reimbursement, free or subsidized meals, and gym memberships.

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