Forest Components makes aircraft parts. The following transactions occurred in July. 1. Purchased $119,000 of materials on account. 2. Issued $117,600 in direct materials to the production department. 3. Issued $8,400 of supplies from the materials inventory. 4. Paid for the materials purchased in transaction (1) using cash. 5. Returned $15,400 of the materials issued to production in (2) to the materials inventory. 6. Direct labor employees earned $217,000, which was paid in cash. 7. Purchased miscellaneous items for the manufacturing plant for $120,400 on account. 8. Recognized depreciation on manufacturing plant of $245,000. 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 $3,000,000. Estimated overhead for the year was $2,790,000. The following balances appeared in the inventory accounts of Forest Components for July. Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Beginning ? ? Ending $88,200 73,500 49,700 521,500 $18,200 ? 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.
Forest Components makes aircraft parts. The following transactions occurred in July. 1. Purchased $119,000 of materials on account. 2. Issued $117,600 in direct materials to the production department. 3. Issued $8,400 of supplies from the materials inventory. 4. Paid for the materials purchased in transaction (1) using cash. 5. Returned $15,400 of the materials issued to production in (2) to the materials inventory. 6. Direct labor employees earned $217,000, which was paid in cash. 7. Purchased miscellaneous items for the manufacturing plant for $120,400 on account. 8. Recognized depreciation on manufacturing plant of $245,000. 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 $3,000,000. Estimated overhead for the year was $2,790,000. The following balances appeared in the inventory accounts of Forest Components for July. Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Beginning ? ? Ending $88,200 73,500 49,700 521,500 $18,200 ? 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:**Forest Components and July Transactions Overview**
Forest Components, a manufacturer of aircraft parts, recorded several significant transactions during the month of July. These transactions are detailed as follows:
1. Purchased $119,000 of materials on account.
2. Issued $117,600 in direct materials to the production department.
3. Issued $8,400 of supplies from the materials inventory.
4. Made a cash payment for the materials purchased in transaction (1).
5. Returned $15,400 of the materials issued to production in transaction (2) back to the materials inventory.
6. Paid direct labor employees' wages amounting to $217,000 in cash.
7. Acquired miscellaneous manufacturing plant items costing $120,400 on account.
8. Recorded depreciation on the manufacturing plant totaling $245,000.
9. Applied the manufacturing overhead for the month.
**Normal Costing and Overhead Application**
Forest Components employs normal costing, utilizing a predetermined annual rate based upon direct labor costs to allocate overhead. For the year, management projected direct labor costs of $3,000,000 and an estimated overhead of $2,790,000.
**Ending Inventory Balances for July**
At the end of July, the following balances were present across various inventory accounts:
| Inventory Category | Beginning Balance | Ending Balance |
|------------------------------|-------------------|----------------|
| Materials Inventory | ? | $88,200 |
| Work-in-Process Inventory | ? | $73,500 |
| Finished Goods Inventory | $18,200 | $49,700 |
| Cost of Goods Sold | ? | $521,500 |
**Required Analytical Tasks**
* a. Construct journal entries to accurately document the aforementioned transactions.
* b. Develop T-accounts to trace the flow and transformation of costs from Materials Inventory through to the Cost of Goods Sold.
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