Chapter 19, Problem 3BPSB

To determine

Concept Introduction:

Job Cost sheet-

Job cost sheet is a document prepared by the company which is used to record the manufacturing cost to determine the total cost assigned to each product or each job.

To prepare:

To prepare job cost sheet for each job.

Answer to Problem 3BPSB

Particulars	Job No. 487	Job No. 488	Job No. 489	Job No. 490	Job No. 491
Materials	30,000	20,000	12,000	14,000	4,000
Labor	8,000	7,000	25,000	26,000	2,000
Overhead	16,000	14,000	50,000	52,000	4,000
Total cost	54,000	41,000	87,000	92,000	10,000

Explanation of Solution

Given,

Materials-

• Job No. 487 - $30,000
• Job No. 488 - $20,000
• Job No. 489 - $12,000
• Job No, 490 - $14,000
• Job No. 491 - $4,000
Labor-
• Job No. 487 - $8,000
• Job No. 488 - $7,000
• Job No. 489 - $25,000
• Job No, 490 - $26,000
• Job No. 491 - $2,000
Overhead-

  $Overhead=200\%*Laborcost$

  $JobNo.487=200\%*\$8,000=16,000$

  $JobNo.488=200\%*\$7,000=14,000$

  $JobNo.\text{ 489 }=200\%*\$25,000=50,000$

  $JobNo.490\text{ =}200\%*\$26,000=52,000$

  $JobNo.491 =200\%*\$2,000=4,000$

Total costs is calculated as follows-

  $\begin{array}{l}Totalcost=Materials+Labor+Overheads\hfill \\ JobNo.487=30,000+8,000+16,000=54,000\hfill \\ JobNo.488=20,000+7,000+14,000=41,000\hfill \\ JobNo.489=12,000+25,000+50,000=87,000\hfill \\ JobNo.490=14,000+26,000+52,000=92,000\hfill \\ JobNo.491=4,000+2,000+4,000=10,000\hfill \end{array}$

Conclusion:

Thus, Job cost sheet is prepared for each job.

To determine

Concept Introduction:

Journal entries-

The business runs with the transactions it makes. Every transaction results in some outcome like the creation of asset, liability, income, loss, gain or expense. The debits and the credits are made on the basis of the rules of the accounting.

To prepare:

To prepare the journal entries entry.

Answer to Problem 3BPSB

Journal entries:

S. No.	Accounts titles and Explanation	Debit ($)	Credit ($)
A.	Raw material inventory	125,000
	Accounts payable		125,000
	(To record purchase of raw materials on account)
B.	Work in process inventory	80,000
	Raw material inventory		80,000
	(To assign raw material inventory to jobs)
	Factory overhead	12,000
	Raw material inventory		12,000
	(To assign costof indirect materials to job)
C.	Factory overhead	11,000
	Cash		11,000
	(To record expense for factory overhead)
D.	Work in process inventory	68,000
	Cash		68,000
	(To assign cost of direct labor to job)
	Factory overhead	16,000
	Cash		16,000
	(To assign cost of indirect labor to job)
E.	Work in process inventory	118,000
	Factory overhead		118,000
	(To apply overhead at 200% of direct labor of Job 487,489,490)
F.	Finished goods inventory	233,000
	Work in process inventory		233,000
	(To transfer work in process to finished goods)
G.	Accounts receivable	340,000
	Sales revenue		340,000
	(To record the sales on account)
	Cost of goods sold	141,000
	Finished goods inventory		141,000
	(To record cost of goods sold)
H.	Factory overhead	96,000
	Accumulated depreciation on building		37,000
	Accumulated depreciation on Equipment		21,000
	Prepaid insurance		7,000
	Property tax payable		31,000
	(To record other factory overhead)
I.	Work in process inventory	18,000
	Factory overhead		18,000
	(To apply overhead at 200% of direct labor of Job. 488,491)

Explanation of Solution

Explanation for journal entry-

1. Raw material inventory is an asset and its balance increases, so it is debited. Accounts payable is a liability and its balance increases, so it is credited.
2. Work in process is an asset and its balance increases, so it is debited. Raw material inventory is an asset and its balance decreases, so it is credited.
Factory overhead is a cost and its balance increases so it is debited. Raw material inventory is an asset and its balance decreases, so it is credited.
3. Factory overhead is a cost and its balance increases so it is debited. Cash is an asset and its balance decreases, so it is credited.
4. Work in process is a current asset and its balance increases, so it is debited. Cash is paid, and it is an asset, its balance is decreasing, so it is credited.
Factory overhead is a cost and its balance increases so it is debited. Cash is paid, and it is an asset, its balance is decreasing, so it is credited.
5. Work in process is a current asset and its balance increases, so it is debited. Factory overhead is an expense and its balance decreases so it is credited.
6. Finished goods is an asset and its balance increases, so it is debited. Work in process is a current asset and its balance decreases, so it is credited.
7. Accounts receivable is an asset and its balance increases, so it is debited. Sales revenue is an income and its balance is increasing so it is credited.
Finished goods are an asset and its balance decreases so it is credited. Cost of goods sold is an expense and its balance increases so it is debited.
8. Factory overhead is a cost and its balance increases so it is debited. Accumulated depreciation is a contra asset and its balance increases, so it is credited. Prepaid insurance is an asset and its balance decreases, so it is credited. Property tax payable is a liability and its balance increases, so it is credited.
9. Work in process is a current asset and its balance increases, so it is debited. Factory overhead is an expense and its balance decreases so it is credited.

Conclusion:

Thus, Journal entries are prepared.

To determine

Concept Introduction:

T-Account

T-Account is most common type of account. It is the simplest account which makes study of accounting very simple.

This accounts resembles with the English letter 'T'.

T-account has three parts-

The title

The debit which is on the left side

The credit which is on the right side

T-Accounts are useful tools for accountants as it helps them to analyze company accounts in effective way.

To prepare:

To prepare T-Accounts and to determine their balances.

Answer to Problem 3BPSB

Set up T-accounts

Raw Material InventoryWork in process inventory Finished goods inventory

Factory overhead Cost of goods sold

T-accounts-

Raw material Inventory
Accounts payable	125,000	Work in process inventory	80,000
		Factory overhead	12,000
Balance	33,000
Work in process inventory
Raw material Inventory	80,000	Finished goods inventory	233,000
Factory wages payable	68,000
Factory overhead	118,000
Factory overhead	18,000
Balance	51,000
Finished goods inventory
Work in process inventory	233,000	Cost of goods sold	141,000
Balance	92,000
Factory overhead
Raw material Inventory	12,000	Work in process inventory	118,000
Cash	11,000	Work in process inventory	18,000
Factory wages payable	16,000
Accumulated depreciation	58,000
Prepaid insurance	7,000
Property tax payable	31,000
		Balance	1,000
Cost of goods sold
Finished goods inventory	141,000
Balance	141,000

Explanation of Solution

The T-shaped accounts are balanced at regular intervals and the time period for balancing depends upon the practice of the organization, say daily, weekly and monthly. When balancing, usually we add all the line items on a particular side for both the sides and we will see which side has more amount. The side with more amount is said to be the balance side of the account and the difference between the amounts is said to be the balance of the account.

Conclusion:

Thus, T-accounts are prepared and their balances are determined.

To determine

Concept Introduction:

Cost of goods sold -

Cost of goods sold can be defined as the total cost assigned to the goods that are sold during a period of time. It is calculated by summing up all the costs incurred starting from purchases till the process of manufacturing.

To Report:

To report the total cost of each job.

Answer to Problem 3BPSB

Work in process inventory
Job 488	41,000
Job 491	10,000
Total work in process	51,000

Finished goods
Job 490	92,000

Cost of goods sold
Job 487	54,000
Job 489	87,000
Total	141,000

Explanation of Solution

  $\begin{array}{l}Totalworkinprocess=Job488+Job491\hfill \\ Totalworkinprocess=\$41,000+10,000\hfill \\ Totalworkinprocess=\$51,000\hfill \end{array}$

Finished goods = Job 490 = $92,000

  $\begin{array}{l}Costofgoodssold=Job487+Job489\hfill \\ Costofgoodssold=54,000+87,000\hfill \\ Costofgoodssold=\$141,000\hfill \end{array}$

Conclusion:

Thus, cost of each jobs are reported.