
Concept explainers
1.
To prepare:
1.

Explanation of Solution
Job cost sheet for job number 487.
Job Number:487 | ||||
Particular | Amount ($) | |||
Materials | 30,000 | |||
Labor | 8,000 | |||
16,000 | ||||
Total Cost | 54,000 | |||
Table (1) |
Hence, the total cost is $54,000.
Working note:
Given,
Overhead rate is 200%.
Formula to calculate the applied overhead,
Substitute $8,000 for direct labor cost and 200% for overhead rate.
Hence, applied overhead is $16,000.
Job cost sheet for job number 137
Job Number:488 | ||||
Particular | Amount ($) | |||
Materials | 20,000 | |||
Labor | 7,000 | |||
Overhead | 14,000 | |||
Total Cost | 41,000 | |||
Table (2) |
Hence, the total cost is $41,000.
Working note:
Given,
Overhead rate is 200%.
Formula to calculate the applied overhead,
Substitute $7,000 for direct labor cost and 200% for overhead rate.
Hence, applied overhead is $14,000.
Job cost sheet for job number 489
Job Number:489 | ||||
Particular | Amount ($) | |||
Materials | 12,000 | |||
Labor | 25,000 | |||
Overhead | 50,000 | |||
Total Cost | 87,000 | |||
Table (3) |
Hence, the total cost is $87,000.
Working note:
Given,
Overhead rate is 200%.
Formula to calculate the applied overhead,
Substitute $25,000 for direct labor cost and 200% for overhead rate.
Hence, applied overhead is $75,000.
Job cost sheet for job 490
Job Number:490 | ||||
Particular | Amount ($) | |||
Materials | 14,000 | |||
Labor | 26,000 | |||
Overhead | 52,000 | |||
Total Cost | 92,000 | |||
Table (4) |
Hence, the total cost is $92,000.
Working note:
Given,
Overhead rate is 200%.
Formula to calculate the applied overhead,
Substitute $26,000 for direct labor cost and 200% for overhead rate.
Hence, applied overhead is $52,000.
Job cost sheet for job 491
Job Number:491 | ||||
Particular | Amount ($) | |||
Materials | 4,000 | |||
Labor | 2,000 | |||
Overhead | 4,000 | |||
Total Cost | 10,000 | |||
Table (5) |
Hence, the total cost is $10,000
Working Notes:
Given,
Overhead rate is 200%.
Formula to calculate the applied overhead,
Substitute $2,000 for direct labor cost and 200% for overhead rate.
Hence, applied overhead is $4,000.
2
To prepare:
2

Explanation of Solution
a.
To record material purchases on credit.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Purchase of raw materials | 125,000 | |||
Accounts payable | 125,000 | |||
(To record material purchases on credit | ||||
Table (6) |
- Purchase of raw materials is an asset account. Raw material increases as the new raw materials has been brought to the business that increases the assets and all the assets are debited as their values increases.
- Account payable is a liability account. Account payable increases as the raw materials are purchased on credit, hence the liability increases and all the liabilities are credited as their values decreases.
b
To record the entry to assign raw materials cost to work in process inventory.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Work in Process inventory | 80,000 | |||
Raw materials inventory | 80,000 | |||
(To record raw materials assign to job) | ||||
Table (7) |
- Work in process inventory is an asset account. The account increases as the raw materials are used in work in process that increases the balance of the work in process inventory account, hence it is debited.
- Raw materials inventory is an asset account. The account decreases as the raw materials are used in the work in process.
Working note:
Given,
Raw material to job 487 is $30,000.
Raw material to job 488 is $20,000.
Raw material to job 489 is $12,000.
Raw material to job 490 is $14,000.
Raw material to job 491 is $4,000.
Computation of total direct materials,
Hence, the total direct materials are $80,000.
To record indirect material costing $19,500
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Factory Overhead account | 12,000 | |||
Inventory-raw material | 12,000 | |||
(To record the overhead cost) | ||||
Table (8) |
- Factory overhead is an expense account. Factory overhead increases as there is an indirect expense and all the expenses are debited.
- Inventory raw materials are an asset account. Inventory decreases as the expense is not directly related to the production and all the assets are credited as their value decreases.
c.
To record the expense for computer program for cash
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Factory Overhead account | 11,000 | |||
Cash | 11,000 | |||
(To record the overhead cost) | ||||
Table (9) |
- Factory overhead is an expense account. The account increases as the expense is paid and all the expenses and losses are debited.
- Cash is an asset account. Cash account decreases as the amount paid for the expense is paid in cash, hence asset decreases and it is credited.
d.
To Record the entry to assign direct labor to job.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Work in Process inventory | 68,000 | |||
Cash | 68,000 | |||
(To record cost of direct labor to job) | ||||
Table (10) |
- Work in process inventory is an asset account. The account increases as the direct labor has been used in work in process inventory that increases the asset, hence it is debited.
- Cash is an asset account. Cash account decreases as the amount paid for the expense is paid in cash, hence asset decreases and it is credited.
To record the expense for computer program for cash
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Factory Overhead account | 16,000 | |||
Cash | 16,000 | |||
(To record the overhead cost) | ||||
Table (11) |
- Factory overhead is an expense account. The account increases as the expense is paid and all the expenses and losses are debited.
- Cash is an asset account. Cash account decreases as the amount paid for the expense is paid in cash, hence asset decreases and it is credited.
Working note:
Given,
Direct labor to job 136 is $12,000.
Direct labor to job 137 is $10,500.
Direct labor to job 138 is $37,500.
Direct labor to job 139 is $39,000.
Direct labor to job 140 is $3,000.
Computation of total direct labor,
Total direct labor is $102,000.
To record indirect labor
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Factory Overhead | 24,000 | |||
Factory Wages Payable | 24,000 | |||
(To record the overhead cost) | ||||
Table (12) |
- Factory overhead is an expense account. Factory overhead increases as there is an indirect labor and all the expenses are debited.
- Factory Wages payable is an expense account. The account decreases as the balance of the indirect labor is transferred to factory overhead, hence it is credited.
e.
To Record overhead applied.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Work In Process | 118,000 | |||
Overhead | 118,000 | |||
(To assign cost of overhead to job) | ||||
Table (13) |
- Work in process is an asset account. The account increases as the overhead is assigned to job as this increase the work in process, hence it is debited.
- Overhead is an expense account. The Account decreases as the overhead is assigned and transferred to work in process, hence it is credited.
Working note:
Given,
Given,
Direct labor to job 487 is $8,000.
Direct labor to job 488 is $25,000.
Direct labor to job 489 is $26,000.
Overhead rate is 200%.
Computation of direct labor cost of following jobs,
Labor cost is $59,000
Computation of applied overhead,
Hence, applied overhead is $118,000.
f.
To record the entry to transfer the job 136, 138 and 139 to finished goods.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Finished Goods Inventory | 178,100 | |||
Work in process inventory | 178,100 | |||
(To transfer jobs into finished goods) | ||||
Table (14) |
- Finished goods are an asset account. The account increases as the balance of the account increases as the jobs has been transferred to this account, hence it is debited.
- Work in process inventory is an asset account. The account decreases as the balance is transferred to finished account, hence it is credited.
Working Notes:
Given,
Raw material to job 487 is $30,000.
Raw material to job 489 is $12,000.
Raw material to job 490 is $14,000.
Direct labor to job 487 is $8,000.
Direct labor to job 489 is $25,000.
Direct labor to job 490 is $26,000.
Computation of the total amount transferred to finished goods,
Total amount transferred is $233,000.
g.
To record the entry for sale
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
340,000 | ||||
Sales | 340,000 | |||
(To record the entry for sale) | ||||
Table (15) |
- Accounts receivable is an asset. The account increases as sales has been made, therefore the debtors increase and it is debited.
- Sales are a revenue account. As revenue increases it is credited.
To record the entry for cost of goods sold
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Cost of goods sold | 141,000 | |||
Finished goods inventory | 141,000 | |||
(To record the entry for sale) | ||||
Table (16) |
Working note:
Given,
Raw material to job 487 is $30,000.
Raw material to job 489 is $12,000.
Direct labor to job 487 is $8,000.
Direct labor to job 489 is $25,000.
Overhead rate is 200%.
Computation of direct labor cost of following jobs,
Labor cost is $33,000
Computation of applied overhead,
Hence, applied overhead is $66,000.
Computation of the cost of goods sold,
Total amount transferred is $141,000
h.
To record other factory overhead.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Factory Overhead | 96,000 | |||
Accumulated Depreciation on Building | 37,000 | |||
Accumulated Depreciation on Equipment | 21,000 | |||
Prepaid Insurance | 7,000 | |||
Property Tax Payable | 31,000 | |||
(To record the other factory overhead) | ||||
Table (17) |
- Factory overhead is an expense account. Factory overhead increases as there is an other overheads recorded and all the expenses are debited.
- Accumulated depreciation on building is a contra asset account. The account has a credit balance and account increases, hence it is credited.
- Accumulated depreciation on equipment is a contra asset account. The account has a credit balance and account increases, hence it is credited.
- Prepaid insurance is a liability account for company. The account increases as the liability is created, hence it is credited.
- Property tax payable is a liability account for company. The account increases as the liability is created, hence it is credited.
i.
To record overhead applied.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Work In Process | 18,000 | |||
Overhead | 18,000 | |||
(To assign cost of overhead to job) | ||||
Table (18) |
- Work in process is an asset account. The account increases as the overhead is assigned to job as this increase the work in process, hence it is debited.
- Overhead is an expense account. The Account decreases as the overhead is assigned and transferred to work in process, hence it is credited.
Working note:
Given,
Direct labor to job 488 is $7,000.
Direct labor to job 491 is $2,000.
Overhead rate is 200%.
Computation of total labor of job 488 and job 491,
Total labor is $9,000.
Computation of applied overhead,
Hence, applied overhead is $18,000.
3.
To prepare: T accounts.
3.

Explanation of Solution
T account for raw material
Raw Materials | |||||
Date | Particular | Debit ($) | Date | Particular | Credit ($) |
Accounts payable | 125,000 | Work in process inventory | 80,000 | ||
Factory overhead | 12,000 | ||||
Balance c/f | 33,000 | ||||
125,000 | 125,000 | ||||
Table (19) |
T account for work in process.
Work in Process | |||||
Date | Particular | Debit ($) | Date | Particular | Credit ($) |
Raw materials inventory | 80,000 | Finished goods inventory | 233,000 | ||
Factory wage payable | 68,000 | Balance c/f | 51,000 | ||
Factory overhead | 118,000 | ||||
Factory overhead | 18,000 | ||||
284,000 | 284,000 | ||||
Table (20) |
T account for finished goods inventory.
Finished goods inventory | |||||
Date | Particular | Debit ($) | Date | Particular | Credit ($) |
Work in process inventory | 233,000 | Cost of goods sold | 141,000 | ||
Balance c/f | 92,000 | ||||
233,000 | 233,000 | ||||
Table (21) |
T account for factory overhead.
Factory overhead | |||||
Date | Particular | Debit ($) | Date | Particular | Credit ($) |
Raw materials inventory | 12,000 | Work in process inventory | 118,000 | ||
Cash | 11,000 | Work in process inventory | 18,000 | ||
Factory wages payable | 16,000 | ||||
58,000 | |||||
Prepaid insurance | 7,000 | ||||
Property tax payable | 31,000 | ||||
Balance c/f | 1,000 | ||||
136,000 | 136,000 | ||||
Table (22) |
T account for cost of goods sold.
Cost of goods sold | |||||
Date | Particular | Debit ($) | Date | Particular | Credit ($) |
Finished goods inventory | 141,000 | Balance c/f | 141,000 | ||
141,000 | 141,000 | ||||
Table (23) |
4.
To compute: The total cost of each job.
4.

Explanation of Solution
Work in process inventory.
Work in process inventory | ||||
Particulars | Amount | |||
Job 488 | 41,000 | |||
Job 491 | 10,000 | |||
Total work in process | 51,000 | |||
Table (24) |
Finished goods
Finished goods | ||||
Particulars | Amount | |||
Job 490 | 92,000 | |||
Total finished goods | 139,400 | |||
Table (25) |
Cost of goods sold
Cost of goods sold | ||||
Particulars | Amount | |||
Job 487 | 54,000 | |||
Job 489 | 87,000 | |||
Total Cost of goods sold | 141,000 | |||
Table (26) |
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