Financial & Managerial Accounting
Financial & Managerial Accounting
17th Edition
ISBN: 9780078025778
Author: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello
Publisher: McGraw-Hill Education
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Chapter 17, Problem 10E

a.

To determine

Prepare journal entry to record the purchase of direct materials in December.

a.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the purchase of direct materials in December.

DateAccounts title and explanation

Debit

($)

Credit

($)

Material inventory125,000
     Accounts payable125,000
(To record the purchase of direct materials on account.)

(Table 1)

  • Material inventory is an asset and there is an increase value of an asset. Hence, debit the materials inventory account by $125,000.
  • Accounts payable is a liability and there is an increase in the value of liability. Hence, credit the accounts payable account by $125,000.

b.

To determine

Prepare journal entry to record the cost of direct materials applied to jobs in December.

b.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the cost of direct materials applied to jobs in December.

DateAccounts title and explanation

Debit

($)

Credit

($)

Work in process inventory100,000
     Material inventory100,000
(To record the cost of direct materials used)

(Table 2)

  • Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory account by $100,000.
  • Material inventory is an asset and there is a decrease value of an asset. Hence, credit the materials inventory account by $100,000.

c.

To determine

Prepare journal entry to record the cost of direct labor applied to jobs in December.

c.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the cost of direct labor applied to jobs in December.

DateAccounts title and explanation

Debit

($)

Credit

($)

Work in process inventory50,000
     Direct labor50,000
(To record the cost of direct labor in December)

(Table 3)

  • Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory account by $50,000.
  • Direct labor is an asset and there is a decrease value of an asset. Hence, credit the direct labor account by $50,000.

d.

To determine

Prepare journal entry to record the actual cost of manufacturing overhead incurred in December.

d.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the actual cost of manufacturing overhead incurred in December.

DateAccounts title and explanation

Debit

($)

Credit

($)

Manufacturing overhead150,000
     Cash150,000
(To record the actual overhead cost incurred.)

(Table 4)

  • Manufacturing overhead (Expense) is a component of stockholder’s equity and there is an increase value of expense. Hence, debit the manufacturing overhead account by $150,000.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash account by $150,000.

e.

To determine

Prepare journal entry to record the cost of manufacturing overhead applied to jobs in December.

e.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the cost of manufacturing overhead applied to jobs in December.

DateAccounts title and explanation

Debit

($)

Credit

($)

Work in process inventory140,000
     Manufacturing overhead (3)140,000
(To apply overhead to jobs in December )

(Table 5)

  • Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory account by $140,000.
  • Manufacturing overhead (Expense) is a component of stockholder’s equity and there is a decrease value of expense. Hence, credit the manufacturing overhead account by $140,000.

Working notes:

Calculate the per- unit value of direct labor hours:

Per- unit value of direct labor hours}=Budgeted overheadDirect labor hours budgeted=$133,0001,900=$70 per direct labor hours (1)

Calculate the total manufacturing overhead applied:

Total manufacturing overhead applied = Direct labor costPer hour wage=$50,000$25=2,000Actual direct labor hours (2)

Calculate the cost manufacturing overhead applied:

Cost of manufacturing overhead applied=(Actual direct labor hours) × (Per direct labor hour applied)=2,000(2)×$70(1)=$140,000 (3)

f.

To determine

Prepare journal entry to record the revenue and the related cost of jobs sold in December. Assume all sales are made on account.

f.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the revenue and the related cost of jobs sold in December. Assume all sales are made on account.

DateAccounts title and explanation

Debit

($)

Credit

($)

Accounts receivable600,000
     Sales600,000
(To record the sale on account during December)

(Table 6)

  • Accounts receivable is an asset and there is an increase in the value of an asset. Hence, debit the accounts receivable by $600,000.
  • Sales (Revenue) are a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the sales by $600,000.
DateAccounts title and explanation

Debit

($)

Credit

($)

Cost of goods sold325,000
     Finished goods inventory325,000
(To record cost of goods sold in December)

(Table 7)

  • Cost of goods sold (expense) is component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the cost of goods sold account by $325,000.
  • Finished goods inventory is an asset and there is a decrease in the value of an asset. Hence, credit the finished goods account by $325,000.

g.

To determine

Prepare journal entry to record the revenue and the related cost of jobs sold in December.

g.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record the revenue and the related cost of jobs sold in December.

DateAccounts title and explanation

Debit

($)

Credit

($)

Selling and  administrative expenses250,000
     Cash250,000
(To record selling and administrative expense of December.)

(Table 8)

  • Selling and administrative Expense is a component of stockholder’s equity and there is an increase value of expense. Hence, debit the Selling and administrative Expense by $250,000.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash account by $250,000.

h.

To determine

Prepare journal entry to close the Manufacturing Overhead account directly to Cost of Goods Sold on December 31.

h.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to close the Manufacturing Overhead account directly to Cost of Goods Sold on December 31.

DateAccounts title and explanation

Debit

($)

Credit

($)

Cost of goods sold10,000
     Manufacturing overhead10,000
(To close the manufacturing overhead that is under-applied($150,000 actual -$140,000 applied)

(Table 9)

  • Cost of goods sold (expense) is component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the cost of goods sold by $10,000.
  • Manufacturing overhead (Expense) is a component of stockholder’s equity and there is s a decrease in value of expense. Hence, credit the manufacturing overhead by $10,000.

i.

To determine

Compute the company’s December income.

i.

Expert Solution
Check Mark

Explanation of Solution

Compute the company’s December income.

ParticularsAmount  in $
Sales600,000
Less: Cost of  goods sold (4)335,000
Gross profit265,000
Less: Selling and  administrative expense250,000
Net income15,000

(Table 10)

Working Notes:

Calculate the cost of goods sold.

Cost of goods sold = Undajusted  cost of goods sold + Under-applied manuacturing overhead=$325,000+ $10,000=$335,000 (4)

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Chapter 17 Solutions

Financial & Managerial Accounting

Ch. 17 - 4. What is meant by the term overhead application...Ch. 17 - 5. What is meant by the term overhead cost driver?...Ch. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - 8. Taylor & Malone is a law firm. Would the...Ch. 17 - 9. Define the term activity base. Ch. 17 - 10. Define the term cost driver. Ch. 17 - 11. Why is the use of a single activity base...Ch. 17 - 12. Describe how activity-based costing can...Ch. 17 - Prob. 13DQCh. 17 - 14. Why is the use of direct labor hours as an...Ch. 17 - 15. Discuss the potential benefits associated with...Ch. 17 - Prob. 1BECh. 17 - Prob. 2BECh. 17 - BRIEF EXERCISE 17.3 Overhead Application...Ch. 17 - BRIEF EXERCISE 17.4 Actual Overhead versus Applied...Ch. 17 - BRIEF EXERCISE 17.5 Types of Cost Accounting...Ch. 17 - Prob. 6BECh. 17 - Prob. 7BECh. 17 - Prob. 8BECh. 17 - BRIEF EXERCISE 17.9 Selecting Activity...Ch. 17 - Prob. 10BECh. 17 - EXERCISE 17.1 Accounting Terminology Listed are...Ch. 17 - Prob. 2ECh. 17 - Prob. 3ECh. 17 - Prob. 4ECh. 17 - EXERCISE 17.5 Cost Classifications Identify...Ch. 17 - Prob. 6ECh. 17 - EXERCISE 17.7 Journal Entries, Cost Flows, and...Ch. 17 - Prob. 8ECh. 17 - EXERCISE 17.9 Journal Entries, Cost Flows, and...Ch. 17 - Prob. 10ECh. 17 - EXERCISE 17.11 Solving for Missing Amounts in a...Ch. 17 - EXERCISE 17.12 Solving for Missing Amounts in a...Ch. 17 - EXERCISE 17.13 Determining Balance Sheet Amounts...Ch. 17 - EXERCISE 17.14 Allocating Activity Cost...Ch. 17 - EXERCISE 17.15 Using ABC to Determine a Bid...Ch. 17 - Prob. 1APCh. 17 - PROBLEM 17.2A Job Order Costing: Journal Entries...Ch. 17 - PROBLEM 17.3A Job Order Costing: A Comprehensive...Ch. 17 - Prob. 4APCh. 17 - PROBLEM 17.5A Poor Drivers Are Cost Drivers Ye...Ch. 17 - PROBLEM 17.6A Applying Overhead Costs Using...Ch. 17 - Prob. 7APCh. 17 - PROBLEM 17.8A ABC versus Use of a Single Activity...Ch. 17 - Prob. 1BPCh. 17 - PROBLEM 17.2B Job Order Costing: Journal Entries...Ch. 17 - PROBLEM 17.3B Job Order Costing: A Comprehensive...Ch. 17 - Prob. 4BPCh. 17 - PROBLEM 17.5B Drivers for Drivers Big Boomers...Ch. 17 - PROBLEM 17.6B Applying Overhead Costs Using...Ch. 17 - Prob. 7BPCh. 17 - LO17-6, LO17-7 PROBLEM 17.8B ABC versus Use of a...Ch. 17 - CASE 17.1 Classic Cabinets has one factory in...Ch. 17 - CASE 17.2 Implementing ABC Dave Miller is the...Ch. 17 - CASE 17.3 The Bidding Wars Kendahl Plastics...
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