Chapter 26, Problem 10SPB

1.

To determine

Prepare general journal entries to record transactions (a) through (k).

Explanation of Solution

Job order costing:

Job order costing is one of the methods of cost accounting under which cost is collected and gathered for each job, work order, or project separately. It is a system by which a factory maintains a separate record of each particular quantity of product that passes through the factory. Job order costing is used when the products produced are significantly different from each other.

Prepare journal entry to record the given transactions.

Date	Accounts title and explanation	Debit ($)	Credit ($)
a.	Material	45,000
	Accounts payable		45,000
	(To record the purchase of materials on account.)
b.	Work in process	10,000
	Work in process	11,000
	Work in process	9,500
	Work in process	12,200
	Materials		42,700
	(To record issuance of  direct materials for the job: job no.201,202,203,204)
c.	Factory overhead	7,500
	Materials		7,500
	(To record the issuance of  indirect materials)
d.	Work in process	18,000
	Work in process	19,000
	Work in process	20,500
	Work in process	17,500
	Wages payable		75,000
	(To record direct labor incurred for the job: job no.201,202,203,204)
e.	Factory overhead	11,000
	Wages payable		11,000
	(To record the indirect labor charged to production)
f.	Factory overhead	7,000
	Cash		7,000
	(To record the payment of electricity bill, heating  oil, and repairs bills for the factory and charge made to production)
g.	Factory overhead	40,000
	Accumulated depreciation		40,000
	(To record the depreciation expense on factory equipment)
h.	Work in process $\left[\$10,000\times \$1.50\right]$	15,000
	Work in process $\left[\$11,000\times \$1.50\right]$	16,500
	Work in process $\left[\$11,000\times \$1.50\right]$	16,500
	Work in process $\left[\$12,000\times \$1.50\right]$	18,000
	Factory  overhead		66,000
	(To record  applied factory overhead to the job: job no.201,202,203,204)
i.	Finished goods (Product C) $\left[\$10,000+\$18,000+\$15,000\right]$	43,000
	Work in process		43,000
	(To record the transfer of Job no. 201 to  Product C)
	Finished goods (Product D) $\left[\$11,000+\$19,000+\$16,500\right]$	46,500
	Work in process		46,500
	(To record the transfer of Job no.202 to  Product D)
	Finished goods (Product E) $\left[\$9,500+\$20,500+\$16,500\right]$	46,500
	Work in process		46,500
	(To record the transfer of Job no.203 to  Product E)
j.	Accounts receivable	47,000
	Sales		47,000
	(To record sale of product C)
	Cost of goods sold $\left[\$10,000+\$18,000+\$15,000\right]$	43,000
	Finished goods (Product C)		43,000
	(To record cost of goods sold on finished goods of Product C)
	Accounts receivable	49,000
	Sales		49,000
	(To record sale of product D)
	Cost of goods sold  $\left[\$11,000+\$19,000+\$16,500\right]$	46,500
	Finished goods (Product D)		46,500
	(To record cost of goods sold on finished goods of Product D)
k.	Factory  overhead	500
	Cost of goods sold (2)		500
	(To record cost of  goods sold)

 (Table 1)

Working note:

(1) Calculate the actual factory overhead:

 $\begin{array}{c}\text{Actual factory overhead = }\left(\begin{array}{l}\text{Indirect materials+Indirect labor+}\\ \text{Payment of electricity bill+}\\ \text{Depreciation expense}\end{array}\right)\\ =\$7,500+\$11,000+\$7,000+\$40,000\\ =\$65,500\end{array}$

(2) Calculate the cost of goods sold:

$\begin{array}{c}\text{Cost of goods sold = Actual factory overhead}-\text{Applied factory overhead}\\ \text{=\$65,500(1)}-\$66,000\\ =\$500\text{(overapplied)}\end{array}$

2.

To determine

Post the entries to the work in process and finished goods T accounts and determine the ending balances in these accounts.

Explanation of Solution

Post the entries to the work in process and finished goods T accounts and determine the ending balances in these accounts.

3.

To determine

Compute the balance in the job cost ledger and verify whether the balance agrees with that in the work in process control account.

Explanation of Solution

The balance of the job cost ledger (Job No.204) is $47,700 $\left[\$12,200+\$17,500+\$18,000\right]$ is balances with the work in process control account of $47,700.