Chapter 19, Problem 3APSA

To determine

Concept Introduction:

Job Cost sheet-

Job cost sheet is a document prepared by the company which is used to record the manufacturing cost to determine the total cost assigned to each product or each job.

To prepare:

To prepare job cost sheet for each job.

Answer to Problem 3APSA

Particulars	Job No. 136	Job No. 137	Job No. 138	Job No. 139	Job No. 140
Materials	48,000	32,000	19,200	22,400	6,400
Labor	12,000	10,500	37,500	39,000	3,000
Overhead	24,000	21,000	75,000	78,000	6,000
Total cost	84,000	63,500	131,700	139,400	15,400

Explanation of Solution

Given,

Materials-

• Job No. 136 - $48,000
• Job No. 137 - $32,000
• Job No. 138 - $19,200
• Job No. 139 - $22,400
• Job No. 140 - $6,400
Labor-
• Job No. 136 - $12,000
• Job No. 137 - $10,500
• Job No. 138 - $37,500
• Job No. 139 - $39,000
• Job No. 140 - $3,000
Overhead-

  $Overhead=200\%*Laborcost$

  $JobNo.136=200\%*\$12,000=24,000$

  $JobNo.137=200\%*\$10,500=21,000$

  $JobNo.138=200\%*\$37,500=75,000$

  $JobNo.139\text{ =}200\%*\$39,000=78,000$

  $JobNo.140 =200\%*\$3,000=6,000$

Total costs is calculated as follows-

  $\begin{array}{l}Totalcost=Materials+Labor+Overheads\hfill \\ JobNo.136=48,000+12,000+24,000=84,000\hfill \\ JobNo.137=32,000+10,500+21,000=63,500\hfill \\ JobNo.138=19,200+37,500+75,000=131,700\hfill \\ JobNo.139=22,400+39,000+78,000=139,400\hfill \\ JobNo.140=6,400+3,000+6,000=15,400\hfill \end{array}$

Conclusion:

Thus, Job cost sheet is prepared for each job.

To determine

Concept Introduction:

Journal entries-

The business runs with the transactions it makes. Every transaction results in some outcome like the creation of asset, liability, income, loss, gain or expense. The debits and the credits are made on the basis of the rules of the accounting.

To prepare:

To prepare the journal entries entry.

Answer to Problem 3APSA

Journal entries:

S. No.	Accounts titles and Explanation	Debit ($)	Credit ($)
A.	Raw material inventory	200,000
	Accounts payable		200,000
	(To record purchase of raw materials on account)
B.	Work in process inventory	128,000
	Raw material inventory		128,000
	(To assign raw material inventory to jobs)
	Factory overhead	19,500
	Raw material inventory		19,500
	(To assign costof indirect materials to job)
C.	Factory overhead	15,000
	Cash		15,000
	(To record expense for factory overhead)
D.	Work in process inventory	102,000
	Cash		102,000
	(To assign cost of direct labor to job)
	Factory overhead	24,000
	Cash		24,000
	(To assign cost of indirect labor to job)
E.	Work in process inventory	177,000
	Factory overhead		177,000
	(To apply overhead at 200% of direct labor of Job 136,138,139)
F.	Finished goods inventory	355,100
	Work in process inventory		355,100
	(To transfer work in process to finished goods)
G.	Accounts receivable	525,000
	Sales revenue		525,000
	(To record the sales on account)
	Cost of goods sold	215,700
	Finished goods inventory		215,700
	(To record cost of goods sold)
H.	Factory overhead	149,500
	Accumulated depreciation on building		68,000
	Accumulated depreciation on Equipment		36,500
	Prepaid insurance		10,000
	Property tax payable		35,000
	(To record other factory overhead)
I.	Work in process inventory	27,000
	Factory overhead		27,000
	(To apply overhead at 200% of direct labor of Job. 137,140)

Explanation of Solution

Explanation for journal entry-

1. Raw material inventory is an asset and its balance increases, so it is debited. Accounts payable is a liability and its balance increases, so it is credited.
2. Work in process is an asset and its balance increases, so it is debited. Raw material inventory is an asset and its balance decreases, so it is credited.
Factory overhead is a cost and its balance increases so it is debited. Raw material inventory is an asset and its balance decreases, so it is credited.
3. Factory overhead is a cost and its balance increases so it is debited. Cash is an asset and its balance decreases, so it is credited.
4. Work in process is a current asset and its balance increases, so it is debited. Cash is paid, and it is an asset, its balance is decreasing, so it is credited.
Factory overhead is a cost and its balance increases so it is debited. Cash is paid, and it is an asset, its balance is decreasing, so it is credited.
5. Work in process is a current asset and its balance increases, so it is debited. Factory overhead is an expense and its balance decreases so it is credited.
6. Finished goods is an asset and its balance increases, so it is debited. Work in process is a current asset and its balance decreases, so it is credited.
7. Accounts receivable is an asset and its balance increases, so it is debited. Sales revenue is an income and its balance is increasing so it is credited.
Finished goods are an asset and its balance decreases so it is credited. Cost of goods sold is an expense and its balance increases so it is debited.
8. Factory overhead is a cost and its balance increases so it is debited. Accumulated depreciation is a contra asset and its balance increases, so it is credited. Prepaid insurance is an asset and its balance decreases, so it is credited. Property tax payable is a liability and its balance increases, so it is credited.
9. Work in process is a current asset and its balance increases, so it is debited. Factory overhead is an expense and its balance decreases so it is credited.

Conclusion:

Thus, Journal entries are prepared.

To determine

Concept Introduction:

T-Account

T-Account is most common type of account. It is the simplest account which makes study of accounting very simple.

This accounts resembles with the English letter 'T'.

T-account has three parts-

The title

The debit which is on the left side

The credit which is on the right side

T-Accounts are useful tools for accountants as it helps them to analyze company accounts in effective way.

To prepare:

To prepare T-Accounts and to determine their balances.

Answer to Problem 3APSA

Set up T-accounts

Raw Material Inventory Work in process inventory Finished goods inventory

Factory overhead Cost of goods sold

T-accounts-

Raw material Inventory
Accounts payable	200,000	Work in process inventory	128,000
		Factory overhead	19,500
Balance	52,500
Work in process inventory
Raw material Inventory	128,000	Finished goods inventory	355,100
Factory wages payable	102,000
Factory overhead	177,000
Factory overhead	27,000
Balance	78,900
Finished goods inventory
Work in process inventory	355,100	Cost of goods sold	215,700
Balance	139,400
Factory overhead
Raw material Inventory	19,500	Work in process inventory	177,000
Cash	15,000	Work in process inventory	27,000
Factory wages payable	24,000
Accumulated depreciation	104,500
Prepaid insurance	10,000
Property tax payable	35,000
Balance	4,000
Cost of goods sold
Finished goods inventory	215,700
Balance	215,700

Explanation of Solution

The T-shaped accounts are balanced at regular intervals and the time period for balancing depends upon the practice of the organization, say daily, weekly and monthly. When balancing, usually we add all the line items on a particular side for both the sides and we will see which side has more amount. The side with more amount is said to be the balance side of the account and the difference between the amounts is said to be the balance of the account.

Conclusion:

Thus, T-accounts are prepared and their balances are determined.

To determine

Concept Introduction:

Cost of goods sold -

Cost of goods sold can be defined as the total cost assigned to the goods that are sold during a period of time. It is calculated by summing up all the costs incurred starting from purchases till the process of manufacturing.

To Report:

To report the total cost of each job.

Answer to Problem 3APSA

Work in process inventory
Job 137	63,500
Job 140	15,400
Total work in process	78,900

Finished goods
Job 139	139,400

Cost of goods sold
Job 136	84,000
Job 138	131,700
Total	215,700

Explanation of Solution

  $\begin{array}{l}Totalworkinprocess=Job137+Job140\hfill \\ Totalworkinprocess=\$63,500+15,400\hfill \\ Totalworkinprocess=\$78,900\hfill \end{array}$

Finished goods = Job 139 = $139,400

  $\begin{array}{l}Costofgoodssold=Job136+Job138\hfill \\ Costofgoodssold=84,000+131,700\hfill \\ Costofgoodssold=\$215,700\hfill \end{array}$

Conclusion:

Thus, cost of each jobs are reported.