Chapter 2, Problem 2PB

Entries and schedules for unfinished jobs and completed jobs

Hildreth Company uses a job order cost system. The following data summarize the operations related to production for April, the first month of operations:

1. A. Materials purchased on account, $147,000.
2. B. Materials requisitioned and factory labor used:

1. C. Factory overhead costs incurred on account, $6,000.
2. D. Depreciation of machinery and equipment, $4,100.
3. E. The factory overhead rate is $40 per machine hour. Machine hours used:

1. F. Jobs completed: 101, 102, 103, and 105.
2. G. Jobs were shipped and customers were billed as follows: Job 101, $62,900; Job 102, $80,700; Job 105, $45,500.

Instructions

1. 1. Journalize the entries to record the summarized operations.
2. 2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month.
3. 3. Prepare a schedule of unfinished jobs to support the balance in the work in process account.
4. 4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.

To determine

Journalize the entries to record summarized operations.

Explanation of Solution

Job order costing

Job order cost system provides a separate record of each particular quantity of product that passes through the factory. Each quantity that is manufactured in the business is known as job. Job order costing is used when the products produced are significantly different from each other.

The journal entries of operations of Company H is as follows:

Date	Account titles and Explanation	Debit($)	Credit($)
a	Materials	147,000
	Accounts Payable		147,000
	(Record materials purchased)
b	Work in process Table (2)	130,110
	Factory overhead	9,000
	Materials		139,110
	(Record material requisitioned to jobs)
	Work in process Table (2)	132,380
	Factory overhead	20,160
	Wages payable		152,540
	(Record factory labor used in production)
c	Factory overhead	6,000
	Accounts payable		6,000
	(Record factory overhead cost incurred on account)
d	Factory overhead	4,100
	Accumulated depreciation – Machinery & Equipment		4,100
	(Record depreciation on account)
e	Work in process	40,480
	Factory overhead (1,012 hours × $40)		40,480
	(Record overhead applied to jobs)
f	Finished goods Table (3)	175,090
	Work in process		175,090
	(Record completion of job)
g	Accounts Receivable	189,100
	Sales		189,100
	(Record sales on account)
h	Cost of goods sold Table (4)	142,610
	Finished goods		142,610
	(Record cost of goods sold)

Table (1)

Justification:

1. a) The material is purchased on account. In regard to this, the material account is debited (Increased) and Accounts Payable is a liability and it is credited (Increased).
2. b) The materials are requisitioned to jobs which includes direct and indirect cost. In regard to this, Work in process account is debited (Increased), Factory overhead account is debited (Increased), Material account is credited (Decreased), and Wages payable account is credited (Increased).
3. c) The factory overhead costs are incurred on account. In regard to this, Factory overhead account is debited (Increased), and Accounts payable account is a liability and is credited (Increased).
4. d) Depreciation on machinery is recorded. In regard to this, Factory overhead account is debited (Increased), and Accumulated depreciation – Machinery account is a contra asset and is credited (Increased).
5. e) Factory overhead cost is applied to jobs. The work in process account is debited (Increased) and factory overhead account is credited (Decreased).
6. f) The jobs are completed in the process. Finished goods account is debited (Increased) and Work in process account is credited (Decreased).
7. g) Goods sold on account. Accounts receivable is an asset and is debited (Increased) and Sales affects stockholders’ equity and is credited (Increased).
8. h) The cost of goods sold is recorded. Cost of goods sold account is debited (Increased), and Finished goods account is credited (Decreased).

Working note:

The material requisitioned to jobs is calculated as follows:

Job	Directmaterials	Directlabor
101	19,320	19,500
102	23,100	28,140
103	13,440	14,000
104	38,200	36,500
105	18,050	15,540
106	18,000	18,700
	130,110	132,380

Table (2)

Compute the cost of jobs finished as follows:

Job	Directmaterials	Directlabor	Factory overhead	Total
101	19,320	19,500	6,160	44,980
102	23,100	28,140	6,400	57,640
103	13,440	14,000	5,040	32,480
105	18,050	15,540	6,400	39,990
				175,090

Table (3)

Compute the cost of goods sold as follows:

Job	Amount ($)
101	44,980
102	57,640
103	39,990
	142,610

Table (4)

To determine

Prepare appropriate T-accounts for work in process and Finished goods account.

Explanation of Solution

The T-account is prepared as follows:

Figure (1)

Figure (2)

In the work in process account, materials requisitioned for jobs is debited, application of factory overhead to jobs is debited and jobs that are completed are credited. Then, closing balance of work in process is determined.

In finished goods account, Jobs that are completed are debited and sale of goods is credited. Then, closing balance of finished goods is determined.

To determine

Prepare schedule of unfinished jobs to support the balance in the work in process account.

Explanation of Solution

The schedule of unfinished jobs is prepared as follows:

Job	Directmaterials ($)	Directlabor ($)	Factory overhead ($)	Total($)
No. 104	38,200	36,500	9,520	84,220
No. 106	18,000	18,700	6,960	43,660
Balance of work in process, Jan 30				127,880

Table (5)

The unfinished jobs are Job 104 and Job 106. The direct material cost, direct labor cost and factory overhead cost consists of jobs cost. The total of uncompleted jobs constitutes balance of work in process as on April 30.

To determine

Prepare schedule of completed jobs to support the balance in the work in process account.

Explanation of Solution

The schedule of completed jobs is prepared as follows:

Job	Directmaterials ($)	Directlabor ($)	Factory overhead ($)	Total($)
No. 105 (Finished goods, January 30)	13,440	14,000	5,040	32,480

Table (6)

The completed job is Job 105. The direct material cost, direct labor cost and factory overhead cost consists of jobs cost. The total of completed jobs constitutes balance of finished goods as on April 30.