Chapter 7, Problem 21E

Assigning Costs to Jobs

The following transactions occurred in April at Steve’s Cabinets, a custom cabinet firm:

1. 1. Purchased $80,000 of materials.
2. 2. Issued $4,000 of supplies from the materials inventory.
3. 3. Purchased $56,000 of materials.
4. 4. Paid for the materials purchased in transaction (1).
5. 5. Issued $68,000 in direct materials to the production department.
6. 6. Incurred direct labor costs of $100,000, which were credited to Wages Payable.
7. 7. Paid $106,000 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant.
8. 8. Applied overhead on the basis of 125 percent of $100,000 direct labor costs.
9. 9. Recognized depreciation on manufacturing property, plant, and equipment of $50,000.

The following balances appeared in the accounts of Steve’s Cabinets for April:

Required

1. a.      Prepare journal entries to record the transactions.
2. b.      Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.