Concept explainers
1.
Prepare general journal entries to record transactions (a) through (k) and make compound entries for (b), (d), and (h), with separate debits for each job.
1.
Explanation of Solution
Job order costing is one of the methods of cost accounting under which cost is collected and gathered for each job, work order, or project separately. It is a system by which a factory maintains a separate record of each particular quantity of product that passes through the factory. Job order costing is used when the products produced are significantly different from each other.
Prepare
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
a. | Material | 45,000 | |
Accounts payable | 45,000 | ||
(To record the purchase of materials on account.) | |||
b. | Work in process | 10,000 | |
Work in process | 11,000 | ||
Work in process | 9,500 | ||
Work in process | 12,200 | ||
Materials | 42,700 | ||
(To record issuance of direct materials for the job: job no.201,202,203,204) | |||
c. | Factory overhead | 7,500 | |
Materials | 7,500 | ||
(To record the issuance of indirect materials) | |||
d. | Work in process | 18,000 | |
Work in process | 19,000 | ||
Work in process | 20,500 | ||
Work in process | 17,500 | ||
Wages payable | 75,000 | ||
(To record direct labor incurred for the job: job no.201,202,203,204) | |||
e. | Factory overhead | 11,000 | |
Wages payable | 11,000 | ||
(To record the indirect labor charged to production) | |||
f. | Factory overhead | 7,000 | |
Cash | 7,000 | ||
(To record the payment of electricity bill, heating oil, and repairs bills for the factory and charge made to production) | |||
g. | Factory overhead | 40,000 | |
| 40,000 | ||
(To record the depreciation expense on factory equipment) | |||
h. | Work in process | 15,000 | |
Work in process | 16,500 | ||
Work in process | 16,500 | ||
Work in process | 18,000 | ||
Factory overhead | 66,000 | ||
(To record applied factory overhead to the job: job no.201,202,203,204) | |||
i. | Finished goods (Product C) | 43,000 | |
Work in process | 43,000 | ||
(To record the transfer of Job no. 201 to Product C) | |||
Finished goods (Product D) | 46,500 | ||
Work in process | 46,500 | ||
(To record the transfer of Job no.202 to Product D) | |||
Finished goods (Product E) | 46,500 | ||
Work in process | 46,500 | ||
(To record the transfer of Job no.203 to Product E) | |||
j. | Accounts receivable | 47,000 | |
Sales | 47,000 | ||
(To record sale of product C) | |||
Cost of goods sold | 43,000 | ||
Finished goods (Product C) | 43,000 | ||
(To record cost of goods sold on finished goods of Product C) | |||
Accounts receivable | 49,000 | ||
Sales | 49,000 | ||
(To record sale of product D) | |||
Cost of goods sold | 46,500 | ||
Finished goods (Product D) | 46,500 | ||
(To record cost of goods sold on finished goods of Product D) | |||
k. | Factory overhead | 500 | |
Cost of goods sold (2) | 500 | ||
(To record cost of goods sold) |
(Table 1)
Working note:
(1) Calculate the actual factory overhead:
(2) Calculate the cost of goods sold:
2.
2.
Explanation of Solution
Post the entries to the work in process and finished goods T accounts and determine the ending balances in these accounts.
3.
Compute the balance in the job cost ledger and verify whether the balance agrees with that in the work in process control account.
3.
Explanation of Solution
The balance of the job cost ledger (Job No.204) is $47,700
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Chapter 26 Solutions
College accounting, chapters 1-9
- JOB ORDER COSTING WITH UNDER- AND OVERAPPLIED FACTORY OVERHEAD M Evans Sons manufactures parts for radios. For each job order, it maintains ledger sheets on which it records direct labor, direct materials, and factory overhead applied. The factory overhead control account contains postings of actual overhead costs. At the end of the month, the under- or overapplied factory overhead is charged to the cost of goods sold account. Factory overhead is applied on the basis of direct labor hours. For Job Nos. 101, 102, 103, and 104, direct labor hours are 12,000, 10,000, 11,000, and 18,000, respectively. The overhead application rate is 1.20/direct labor hour (a) Purchased raw materials on account, 50,000. (b) Issued direct materials: (c) Issued indirect materials to production, 8,000. (d) Incurred direct labor costs: (e) Charged indirect labor to production, 15,000. (f) Paid electricity bill, taxes, and repair fees for the factory and charged to production, 8,000. (g) Depreciation expense on factory equipment, 30,000. (h) Applied factory overhead to Job Nos. 101-104 using the predetermined factory overhead rare (see above). (i) Finished Job Nos. 101-103 and transferred to the finished goods inventory account as products N, O, and P. (j) Sold products N and O for 50,000 and 45,400, respectively. (k) Transferred under- or overapplied factory overhead balance to the cost of goods sold account. REQUIRED 1. Prepare general journal entries to record transactions (a) through (k). Make compound entries for (b), (d), and (h), with separate debits for each job. 2. Post the entries to the work in process and finished goods T accounts only and determine the ending balances in these accounts. 3. Compute the balance in the job cost ledger and verify that this balance agrees with that in the work in process control account.arrow_forwardJOB ORDER COSTING WITH UNDER- AND OVERAPPLIED FACTORY OVERHEAD M. Evans Sons manufactures parts for radios. For each job order, it maintains ledger sheets on which it records direct labor, direct materials, and factory overhead applied. The factory overhead control account contains postings of actual overhead costs. At the end of the month, the under- or over applied factory overhead is charged to the cost of goods sold account. Factory overhead is applied on the basis of direct labor hours. For Job Nos. 101, 102,103, and 104, direct labor hours are 12, 000, 10,000, 11, 000, and 18,000, respectively. The overhead application rate is 1.20/direct labor hour. (a) Purchased raw materials on account, 50,000. (b) Issued direct materials: (c) Issued indirect materials to production, 8,000. (d) Incurred direct labor costs: (e) Charged indirect labor to production, 15,000. (f) Paid electricity bill, taxes, and repair fees for the factory and charged to production, 8,000. (g) Depreciation expense on factory equipment, 30,000. (h) Applied factory overhead to Job Nos. 101104 using the predetermined factory overhead rate (see above). (i) Finished Job Nos. 101103 and transferred to the finished goods inventory account as products N, O, and P. (j) Sold products N and for 50,000 and 45,400, respectively. (k) Transferred under- or over applied factory overhead balance to the cost of goods sold account. REQUIRED 1. Prepare general journal entries to record transactions (a) through (k). 2. Post the entries to the work in process and finished goods accounts only and determine the ending balances in these accounts. 3. Compute the balance in the job cost ledger and verify that this balance agrees with that in the work in process control account.arrow_forwardChannel Products Inc. uses the job order cost system of accounting. The following is a list of the jobs completed during March, showing the charges for materials issued to production and for direct labor. Assume that factory overhead is applied on the basis of direct labor costs and that the predetermined rate is 200%. Required: Compute the amount of overhead to be added to the cost of each job completed during the month. Compute the total cost of each job completed during the month. Compute the total cost of producing all the jobs finished during the month.arrow_forward
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