Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Textbook Question
Chapter 1, Problem 7P

Selected account balances and transactions of Titan Foundry Inc. follow:

Chapter 1, Problem 7P, Selected account balances and transactions of Titan Foundry Inc. follow: May Transactions: a.

May Transactions:

  1. a. Purchased raw materials and factory supplies on account at costs of $45,000 and $10,000, respectively. (One inventory account is maintained.)
  2. b. Incurred wages during the month of $65,000 ($15,000 was for indirect labor).
  3. c. Incurred factory overhead costs in the amount of $42,000 on account.
  4. d. Made adjusting entries to record $10,000 of factory overhead for items such as depreciation (credit Various Credits). Factory overhead was closed to Work in Process. Completed jobs were transferred to Finished Goods, and the cost of jobs sold was charged to Cost of Goods Sold.

Required:

Prepare journal entries for the following:

  1. 1. The purchase of raw materials and factory supplies.
  2. 2. The issuance of raw materials and supplies into production. (Hint: Be certain to consider the beginning and ending balances of raw materials and supplies as well as the amount of the purchases.)
  3. 3. The recording of the payroll.
  4. 4. The distribution of the payroll.
  5. 5. The payment of the payroll.
  6. 6. The recording of factory overhead incurred.
  7. 7. The adjusting entry for factory overhead.
  8. 8. The entry to transfer factory overhead costs to Work in Process.
  9. 9. The entry to transfer the cost of completed work to Finished Goods. (Hint: Be sure to consider the beginning and ending balances of Work in Process as well as the manufacturing costs added to Work in Process this period.)
  10. 10. The entry to record the cost of goods sold. (Hint: Be sure to consider the beginning and ending balances of Finished Goods as well as the cost of the goods finished during the month.)
Expert Solution & Answer
Check Mark
To determine

Prepare journal entry to record the given transactions.

Explanation of Solution

Cost accounting system of an organization consists of procedures and techniques used by an enterprise. This system helps the enterprise to track their resources that are used in creating and delivering products and services.

Prepare journal entry to record the given transactions.

DateAccounts title and explanation

Debit

($)

Credit

($)

1.Material inventory55,000 
 Accounts payable 55,000
 (To record the purchase of materials and office supplies on account)  
    
2.Work in process inventory (Materials) (1)45,500 
 Factory overhead (Indirect materials) (2)9,900 
 Materials inventory 55,400
 (To record issuance of raw materials and supply for production)  
    
3.Payroll65,000 
 Wages payable 65,000
 (To record the payroll)  
    
4.Work in process inventory (Labor)50,000 
 Factory overhead (Indirect labor)15,000 
 Payroll 65,000
 (To record the distribution of payroll)  
    
5.Wages payable65,000 
 Cash 65,000
 (To record the payment of payroll)  
    
6.Factory overhead42,000 
 Accounts payable 42,000
 (To record the factory overhead incurred)  
    
7.Factory overhead10,000 
 Various credits (Prepaid insurance, Accumulated Depreciation) 10,000
 (Adjusting entry for the factory overhead expense)  
    
8.Work in  process (3)76,900 
 Factory overhead 76,900
 (To record transfer of factory overhead costs to work in process)  
    
9.Finished goods (4)169,400 
 Work in process 169,400
 (To record transfer of cost of completed work to finished goods)  
    
10Cost of goods sold (5)168,200 
 Finished goods 168,200
 (To record the cost of goods sold)  

(Table 1)

Working note 1: Calculate the work in process of raw materials.

Work in process of raw materials }=(Beginning balance+PurchaseEnding balance)=$6,000+$45,000$5,500=$45,500

Working note 2: Calculate the factory overhead of indirect materials.

Factory overhead of indirect materials }=(Beginning balance+PurchaseEnding balance)=$800+$10,000$900=$9,900

Working note 3: Calculate the amount of goods transferred from factory overhead to work in process.

Work in process =(Indirect materials+Indirect labor+Factory overhead paid+Factory overhead recorded)=$9,900+$15,000+$42,000+$10,000=$76,900

Working note 4: Calculate the amount goods transferred from completed work to finished goods.

Finished goods =(Beginning work in process + Materials+ Labor+Factory overheadEnding work in process)=$3,500+$45,500+$50,000+$76,900$6,500=$169,400

Working note 5: Calculate the cost of goods sold.

Cost of goods sold =(Beginning balance of finished goods + Goods fininshed during the monthEnding balance of the finished goods)=$12,000+$169,400$13,200=$168,200

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Chapter 1 Solutions

Principles of Cost Accounting

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