Chapter 1, Problem 10P

Sultan, Inc. manufactures goods to special order and uses a job order cost system. During its first month of operations, the following selected transactions took place:

Required:

1. 1. Prepare a schedule reflecting the cost of each of the four jobs.
2. 2. Prepare journal entries to record the transactions.
3. 3. Compute the ending balance in Work in Process.
4. 4. Compute the ending balance in Finished Goods.

To determine

Prepare a schedule that reflects the cost of all four jobs.

Explanation of Solution

Prepare a schedule that reflects the cost of all four jobs.

Particulars	Job 101 ($)	Job 102 ($)	Job 103 ($)	Job 104 ($)	Total Cost ($)
Direct Materials	2,200	5,700	7,100	1,700	16,700
Direct Labor	2,700	6,800	9,200	2,100	20,800
Factory Overhead	1,200	2,000	3,800	1,000	8,000
Total	6,100	14,500	20,100	4,800	45,500

Table (1)

To determine

Provide journal entry to record the given transactions.

Explanation of Solution

Provide journal entry to record the given transactions.

Date	Accounts title and explanation	Debit ($)	Credit ($)
a	Materials	37,000
	Accounts payable		37,000
	(To record materials purchased on account)
b	Work in Process	16,700
	Factory overhead	1,350
	Materials		18,050
	(To record issue of direct materials and indirect materials)
c	Payroll	23,050
	Wages Payable		23,050
	(To record factory wages and salaries)
d	Work in Process	20,800
	Factory overhead	2,250
	Payroll		23,050
	(To record payment of wages to the labor)
e	Factory overhead	2,400
	Accounts payable		2,400
	(To record factory overhead costs on account)
f.	Factory overhead	2,000
	Accumulated Depreciation - Machinery		2,000
	(To record depreciation on factory machine)
g.	Work in Process	8,000
	Factory Overhead		8,000
	(To record transfer of factory overhead to Work-in process)
h.	Finished Goods (1)	40,700
	Work in Process		40,700
	(To record the transfer of cost of completed work to finished goods)
i	Accounts receivable	39,000
	Sales		39,000
	(To record the sale made on account)
	Cost of goods sold (2)	20,600
	Finished goods		20,600
	(To record the cost of goods sold)

Table (2)

Working note 1: Calculate the cost of completed work (finished goods).

$\begin{array}{c}\text{Finished goods =Job110}\text{+}\text{Job102}\text{+}\text{Job103}\\ =\$6,100+\$14,500+\$20,100\\ =\$40,700\end{array}$

Working note 2: Calculate the cost of goods sold.

$\begin{array}{c}\text{Cost of goods sold =}\text{Job101}\text{+}\text{Job102}\\ =\$6,100+\$14,500\\ =\$20,600\end{array}$

To determine

Calculate the ending balance in work-in process.

Explanation of Solution

Calculate the ending balance in work-in process.

$\begin{array}{c}\text{Ending balance in work-in process = }\left(\begin{array}{l}\text{Beginning}\text{work}\text{in}\text{process +}\text{Direct}\text{materials}\\ \text{+}\text{Direct labor +Factory overhead }\\ -\text{ Finished goods }\end{array}\right)\\ =\left(\$0+\$16,700+\$20,800+\$8,000\right)-\$40,700\\ =\$4,800\end{array}$

Hence, the ending balance in work-in process is $4,800.

To determine

Calculate the ending balance in finished goods.

Explanation of Solution

Calculate the ending balance in finished goods.

$\begin{array}{c}\text{Ending balance in finished goods = }\left(\begin{array}{l}\text{Beginning}\text{balance}\text{of}\text{finished}\text{goods }\\ \text{+}\text{Finished goods during the period}\\ -\text{ Cost of goods sold}\end{array}\right)\\ =\$0+\$40,700-\$20,600\\ =\$20,100\end{array}$

Hence, the ending balance in finished goods is $20,100.