Ch 2
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Louisiana State University *
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Course
7060
Subject
Accounting
Date
Feb 20, 2024
Type
Pages
19
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15.
(
LO 5
)
At end of the year, a company has a $1,200 debit balance in Manufacturing
Overhead. The company:
1. makes an adjusting entry by debiting Manufacturing Overhead Applied for $1,200
and crediting Manufacturing Overhead for $1,200.
2. makes an adjusting entry by debiting Manufacturing Overhead Expense for
$1,200 and crediting Manufacturing Overhead for $1,200.
3. makes an adjusting entry by debiting Cost of Goods Sold for $1,200 and crediting
Manufacturing Overhead for $1,200.
4. makes no adjusting entry because differences between actual overhead and the
amount applied are a normal part of job order costing and will average out over
the next year.
c.
The company would make an adjusting entry for the underapplied overhead by
debiting Cost of Goods Sold for $1,200 and crediting Manufacturing Overhead for
$1,200, not by debiting (a) Manufacturing Overhead Applied for $1,200 or (b)
Manufacturing Overhead Expense for $1,200. Choice (d) is incorrect because at the end
of the year, a company makes an entry to eliminate any balance in Manufacturing
Overhead.
16.
(
LO 5
)
Manufacturing overhead is underapplied if:
1. actual overhead is less than applied.
2. actual overhead is greater than applied.
3. the predetermined rate equals the actual rate.
4. actual overhead equals applied overhead.
b.
Manufacturing overhead is underapplied if actual overhead is greater than applied
overhead. The other choices are incorrect because (a) if actual overhead is less than
applied, then manufacturing overhead is overapplied; (c) if the predetermined rate
equals the actual rate, the actual overhead costs incurred equal the overhead costs
applied, neither over- nor underapplied; and (d) if the actual overhead equals the
applied overhead, neither over- nor underapplied occurs.
Practice Brief Exercises
Prepare entries to record factory labor
.
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1.
(
LO 2
)
During January, its first month of operations, Swarzak Company had factory
labor of $9,000. Time tickets show that the factory labor of $9,000 was used as follows:
Job 1 $3,200, Job 2 $2,600, Job 3 $2,200, and general factory use $1,000. Prepare
summary journal entries to record factory labor.
1.
Jan. 31 Factory Labor
9,000
Payroll Liabilities
9,000
Jan. 31 Work in Process Inventory 8,000
*
Manufacturing Overhead
1,000
Factory Labor
9,000
*
$3,200 + $2,600 + $2,200
Assign manufacturing overhead to production
.
2.
(
LO 3
)
Brock Company estimates that annual manufacturing overhead costs will be
$950,000. Annual direct labor cost is the base used to apply overhead, and it is
estimated to be $500,000. During January, Brock incurred direct labor costs of $40,000.
Prepare the entry to assign overhead to production.
2.
Overhead rate based on direct labor cost = ($950,000 ÷ $500,000) = 190%.
Jan. 31 Work in Process Inventory
76,000
Manufacturing Overhead ($40,000 × 190%)
76,000
Prepare entries for completion and sale of jobs
.
3.
(
LO 4
)
In May, Huntzinger Company completes Jobs 14, 15, and 16. Job 14 cost
$40,000, Job 15 $70,000, and Job 16 $35,000. On May 31, Job 14 is sold to a customer on
account for $72,000. Journalize the entries for the completion of the three jobs and the
sale of Job 14.
3.
May 31 Finished Goods Inventory
145,000
*
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Work in Process Inventory
145,000
31
Accounts Receivable
72,000
Sales Revenue
72,000
31
Cost of Goods Sold
40,000
Finished Goods Inventory
40,000
*
$40,000 + $70,000 + $35,000
Prepare adjusting entries for under- and overapplied overhead
.
4.
(
LO 5
)
At December 31, the balances in Manufacturing Overhead are Alex Company
—debit $2,200, Katz Company—credit $1,900. Prepare the adjusting entry for each
company at December 31, assuming the adjustment is made to cost of goods sold.
4.
Alex Company
Dec. 31 Cost of Goods Sold
2,200
Manufacturing Overhead
2,200
Katz Company
Dec. 31 Manufacturing Overhead 1,900
Cost of Goods Sold
1,900
Practice Exercises
Analyze a job cost sheet and prepare entries for manufacturing costs
.
1.
(
LO 1
, 2
, 3
, 4
)
A job cost sheet for Michaels Company is shown below.
Job No. 92
For 2,000 Units
Date
Direct Materials Direct Labor Manufacturing Overhead
Beg. bal. Jan. 1
3,925
6,000
4,200
8
6,000
12
8,500
6,375
25
2,000
27
4,000
3,000
11,925
18,500
13,575
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Job No. 92
For 2,000 Units
Cost of completed job:
Direct materials
$11,925
Direct labor
18,500
Manufacturing overhead
13,575
Total cost
$44,000
Unit cost ($44,000 ÷ 2,000)
$ 22.00
Instructions
1. Answer the following questions.
1. What was the balance in Work in Process Inventory on January 1 if this was
the only unfinished job?
2. If manufacturing overhead is applied on the basis of direct labor cost, what
overhead rate was used in each year?
2. Prepare summary entries at January 31 to record the current year’s transactions
pertaining to Job No. 92.
1.
1. 1. $14,125, or ($3,925 + $6,000 + $4,200).
2. Last year 70%, or ($4,200 ÷ $6,000); this year 75% (either $6,375 ÷ $8,500 or
$3,000 ÷ $4,000).
2. Jan. 31 Work in Process Inventory 8,000
Raw Materials Inventory
($6,000 + $2,000)
8,000
31
Work in Process Inventory 12,500
Factory Labor
($8,500 + $4,000)
12,500
31
Work in Process Inventory 9,375
Manufacturing Overhead
($6,375 + $3,000)
9,375
31
Finished Goods Inventory
44,000
Work in Process Inventory
44,000
Compute the overhead rate and under- or overapplied overhead
.
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2.
(
LO 3
, 5
)
Kwik Kopy Company applies operating overhead to photocopying jobs on
the basis of machine hours used. Overhead costs are estimated to total $290,000 for
the year, and machine usage is estimated at 125,000 hours.
For the year, $295,000 of overhead costs are incurred and 130,000 hours are used.
Instructions
1. Compute the service overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Assuming the under- or overapplied overhead for the year is not allocated to
inventory accounts, prepare the adjusting entry to assign the amount to cost of
services provided.
2.
1. $2.32 per machine hour ($290,000 ÷ 125,000).
2. $295,000 − ($2.32 × 130,000 machine hours)
$295,000 − $301,600 = $6,600 overapplied
3. Operating Overhead
6,600
Cost of Services Provided
6,600
Practice Problem
Compute predetermined overhead rate, apply overhead, and calculate under- or overapplied
overhead
.
(
LO 3
, 5
)
Cardella Company applies overhead on the basis of direct labor costs. The
company estimates annual overhead costs to be $760,000 and annual direct labor
costs to be $950,000. During February, Cardella works on two jobs: A16 and B17.
Summary data concerning these jobs are as follows.
Manufacturing Costs Incurred
Purchased $54,000 of raw materials on account.
Factory labor $80,000.
Manufacturing overhead incurred exclusive of indirect materials and indirect labor
$59,800. This was comprised of utilities $25,000, insurance $9,000, depreciation
$10,000, and property taxes $15,800.
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Assignment of Costs
Direct materials:
Job A16 $27,000, Job B17 $21,000
Indirect materials: $3,000
Direct labor:
Job A16 $52,000, Job B17 $26,000
Indirect labor:
$2,000
The company completed Job A16 and sold it on account for $150,000. Job B17 was only
partially completed.
Instructions
1. Compute the predetermined overhead rate.
2. Journalize the February transactions in the sequence presented in the chapter
(use February 28 for all dates).
3. What was the amount of under- or overapplied manufacturing overhead?
1. Estimated annual
overhead costs
÷
Estimated annual
operating activity
=
Predetermined
overhead rate
$760,000
÷ $950,000
= 80%
2. (1)
Feb.
28
Raw Materials Inventory
54,000
Accounts Payable
54,000
(Purchase of raw materials on account)
(2)
28
Factory Labor
80,000
Payroll Liabilities
80,000
(To record factory labor costs)
(3)
28
Manufacturing Overhead
59,800
Utilities Payable
25,000
Prepaid Insurance
9,000
Accumulated Depreciation
10,000
Property Taxes Payable
15,800
(To record overhead costs)
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Work in Process Inventory
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Utilities Expense
Manufacturing Overhead
Accounts Payable
Accounts Receivable
Property Taxes Payable
Accumulated Depreciation
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CR
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- Pharoah Engineering Contractors incurred employee payroll costs of $32,400 ($25,200 direct and $7,200 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor cost. Record the entries to assign payroll liabilities and to apply overhead. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation (To record service salary and wages) (To record the applied overhead) Debit Creditarrow_forwardWarner Company purchases $53,600 of raw materials on account, and it incurs $61,000 of factory labor costs.Journalize the two transactions on March 31, assuming the labor costs are not paid until April. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Mar. 31 (To record raw materials purchased) 31 (To record factory labor costs)arrow_forwardBlossom Company purchases $62,000 of raw materials on account, and it incurs $74,400 of factory labor costs. Journalize the two transactions on March 31, assuming the labor costs are not paid until April. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Mar. 31 31 (To record raw materials purchased) (To record factory labor costs) Debit Creditarrow_forward
- Swifty Company purchases $50,700 of raw materials on account, and it incurs $64,000 of factory labor costs. Journalize the two transactions on March 31, assuming the labor costs are not paid until April. (Credit account titles are automatically Indented when amount is entered. Do not indent manually.) Date Mar. 31 31 Account Titles and Explanation (To record raw materials purchased) (To record factory labor costs) Debit Creditarrow_forwardWildhorse Engineering Contractors incurred employee payroll costs of $43,920 ($34,160 direct and $9,760 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor cost. Record the entries to assign payroll liabilities and to apply overhead. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation (To record service salary and wages) (To record the applied overhead) Debit Creditarrow_forwardWarner Company purchases $51,600 of raw materials on account, and it incurs $65,700 of factory labor costs. Journalize the two transactions on March 31, assuming the labor costs are not paid until April. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Mar. 31 (To record raw materials purchased) 31 (To record factory labor costs)arrow_forward
- oriole company purchases $44, 000 of raw materials on account, and it incurs $52, 800 of factory labor costsOriole Company purchases $44,000 of raw materials on account, and it incurs $52, 800 of factory labor costs. Journalize the two transactions on March 31, assuming the labor costs are not paid until April. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Mar. 31 (To record raw materials purchased ) 31 (To record factory labor costs)arrow_forward2. During the month, Job AB2 used specialized machinery for 450 hours and incurred $500 in utilities on account, $300 in factory depreciation expense, and $100 in property tax on the factory. Work in Process Inventory Factory Depreciation Expense Finished Goods Inventory Utilities Expense Manufacturing Overhead Accounts Payable Accounts Receivable Property Taxes Payable Accumulated Depreciation PLEASE NOTE #1: For similar accounting treatment (DR or CR), you are to record accounts in the same order as shown in the problem. PLEASE NOTE #2: You must enter the account names exactly as written above and all whole dollar amounts will be with "$" and commas as needed (i.e. $12,345). Using the above accounts, prepare journal entries for the following transactions: Record the costs incurred: DR ? ? CR ? ? CR ? ? CR ? ? Record the allocation of overhead at the predetermined rate of $1.50 per machine hour: DR ? ? CR ? ?arrow_forwardPlease do not give solution in image format thankuarrow_forward
- please assist with B (iv-vii). thank you!!!arrow_forwardanswer in text form please (without image), Note: .Every entry should have narration pleasearrow_forwardRecord the following journal entries for Allen Company: (Click the icon to view the transactions.) (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) 6. Purchased raw materials on account, $5,000. Date 6. 7. Used $2,000 in direct materials and $1,000 in indirect materials in production. Accounts and Explanation Date Accounts and Explanation 7. Debit More info Credit 4 6. Purchased materials on account. $5.000. 7. Used $2,000 in direct materials and $1,000 in indirect materials in production. 8. Incurred $5,000 in labor costs, of which 80% was direct labor. Xarrow_forward
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