Chapter 26, Problem 9SPA

JOB ORDER COSTING TRANSACTIONS Stonestreet Enterprises makes garage doors. During the month of February, the company had four job orders: 205, 206, 207, and 208. Overhead was applied at predetermined rates, while actual factory overhead was recorded as incurred. All four jobs were completed.

1. (a) Purchased raw materials on account, $44,000.
2. (b) Issued direct materials to production:

1. (c) Issued indirect materials to production, $5,700.
2. (d) Incurred direct labor costs:

1. (e) Charged indirect labor to production, $3,400.
2. (f) Paid electricity, heating oil, and repair bills for the factory and charged to production, $5,300.
3. (g) Applied factory overhead to each of the jobs using a predetermined factory over-head rate as follows:

1. (h) Finished Job Nos. 205-208 and transferred to the finished goods inventory account as products L, M, N, and O, respectively.
2. (i) Sold products L, M, N, and O, on account, for $21,000, $20,300, $ 19,000, and $20,500, respectively.

REQUIRED

1. 1. Prepare general journal entries to record transactions (a) through (i). Make compound entries for (b), (d), and (g), with separate debits for each job.
2. 2. Post the entries to the work in process and finished goods T accounts only.

To determine

Prepare general journal entries to record transactions (a) through (i) and make compound entries for (b), (d), and (g), with separate debits for each job.

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	44,000
	Accounts payable		44,000
	(To record the purchase of materials on account.)
b.	Work in process	8,500
	Work in process	9,600
	Work in process	8,000
	Work in process	9,000
	Materials		35,100
	(To record direct materials incurred for the job: job no.205,206,207,208)
c.	Factory overhead	5,700
	Materials		5,700
	(To record the issuance of  indirect materials)
d.	Work in process	5,400
	Work in process	4,600
	Work in process	5,200
	Work in process	5,500
	Wages payable		20,700
	(To record direct labor incurred for the job: job no.205,206,207,208)
e.	Factory overhead	3,400
	Wages payable		3,400
	(To record the indirect labor charged to production)
f.	Factory overhead	5,300
	Cash		5,300
	(To record the payment of electricity bill, heating  oil, and repairs bills for the factory and charge made to production)
g.	Work in process	3,300
	Work in process	3,900
	Work in process	3,300
	Work in process	3,900
	Factory  overhead		14,400
	(To record  applied factory overhead to the job: job no.205,206,207,208)
h.	Finished goods (Product L) $\left[\$8,500+\$5,400+\$3,300\right]$	17,200
	Work in process		17,200
	(To record the transfer of Job no. 205 to  Product L)
	Finished goods (Product M) $\left[\$9,600+\$4,600+\$3,900\right]$	18,100
	Work in process		18,100
	(To record the transfer of Job no.206 to  Product M)
	Finished goods (Product N) $\left[\$8,000+\$5,200+\$3,300\right]$	16,500
	Work in process		16,500
	(To record the transfer of Job no.207 to  Product N)
	Finished goods (Product O)  $\left[\$9,000+\$5,500+\$3,900\right]$	18,400
	Work in process		18,400
	(To record the transfer of Job no.208 to  Product O)
i.	Accounts receivable	21,000
	Sales		21,000
	(To record sale of product L)
	Cost of goods sold $\left[\$8,500+\$5,400+\$3,300\right]$	17,200
	Finished goods (Product L)		17,200
	(To record cost of goods sold on finished goods of Product L)
	Accounts receivable	20,300
	Sales		20,300
	(To record sale of product M)
	Cost of goods sold $\left[\$9,600+\$4,600+\$3,900\right]$	18,100
	Finished goods (Product M)		18,100
	(To record cost of goods sold on finished goods of Product M)
	Accounts receivable	19,000
	Sales		19,000
	(To record sale of product N)
	Cost of goods sold $\left[\$8,000+\$5,200+\$3,300\right]$	16,500
	Finished goods (Product N)		16,500
	(To record cost of goods sold on finished goods of Product N)
	Accounts receivable	20,500
	Sales		20,500
	(To record sale of product O)
	Cost of goods sold $\left[\$9,000+\$5,500+\$3,900\right]$	18,400
	Finished goods (Product O)		18,400
	(To record cost of goods sold on finished goods of Product O)

 (Table 1)

To determine

Post the entries to the work in process and finished goods T accounts.

Explanation of Solution