ACCT 2101 Chapter Notes - Chapter 2: General Ledger, Finished Good, Subledger
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Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2017, Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $10,000; direct labor $6,000; and manufacturing overhead $9,000. Job No. 23 had been completed at a cost of $42,000 and was part of finished goods inventory. There was a $5,000 balance in the Raw Materials Inventory account.
During the month of January, the company began production on Jobs 26 and 27, and completed Jobs 25 and 26. Jobs 23 and 25 were sold on account during the month for $63,000 and $74,000, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $45,000 on account.
2. Incurred factory labor costs of $33,500. Of this amount, $7,500 related to employer
payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $10,000;
indirect labor $9,500; depreciation expense on equipment $12,000; and various
other manufacturing overhead costs on account $11,000.
4. Assigned direct materials and direct labor to jobs as follows.
Job No. | Direct Materials | Direct Labor |
25 | $ 5,000 | $ 3,000 |
26 | 17,000 | 12,000 |
27 | 13,000 | 9,000 |
5. The company uses direct labor hours as the activity base to assign overhead. Direct labor hours incurred on each job were as follows: Job No. 25, 200; Job No. 26, 800; and Job No. 27, 600.
Instructions
(a) Calculate the predetermined overhead rate for the year 2017, assuming Pedriani Company estimates total manufacturing overhead costs of $440,000, direct labor costs of $300,000, and direct labor hours of 20,000 for the year.
(b) Open job cost sheets for Jobs 25, 26, and 27. Enter the January 1 balances on the job cost sheet for Job No. 25.
(c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.
(d) Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary.
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(e) Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.
(f) Prepare the journal entry (or entries) to record the sale of any job(s) during the month.
(g) What is the balance in the Work in Process Inventory account at the end of the month? What does this balance consist of?
(h) What is the amount of over- or underapplied overhead?
All questions have to do with cost accounting systems,more in particular, process cost systems.
Complete each of the following statements by writing theappropriate words or amounts in the answers blanks.
1-5. Identify whether the process cost or job order cost systemwould be more appropriate for each of the followingbusinesses:
1. accounting firm 1. ____
2. breakfast cereal manufacturer 2. ____
3. ship construction 3. ____
4. pharmaceuticals company 4. ____
5. computer chip manufacturer 5. ____
6. The number of units that could have been completed within agiven accounting period with respect to direct materials andconversion costs is the 6. ____
7. Direct labor and factory overhead are referred to as 7.____
8â9. Oslo Manufacturing incurred $72,000 of direct materialscosts, direct labor costs of $24,500, and factory overhead of$20,500. If 1,000 direct materials equivalent units and 900conversion equivalent units were manufactured, then:
8. The equivalent unit cost for direct materials is 8. $____
9. The equivalent unit cost for conversion is 9. $____
10. The periodic report prepared for each processing department,summarizing (1) the units for which the department is responsibleand their disposition and (2) the costs charged the department andtheir allocation, is termed the 10. ____
11. The method of inventory costing that assumes the unitproduct costs should be determined separately for each period inthe order in which the costs were incurred is 11. ____
12â15. In a process cost system, the cost of goods completed andthe ending inventory valuation are determined by using thefollowing four steps:
12. ____
13. ____
14. ____
15. ____
16â17. The transferred costs of completed production inDepartment A using a process cost system include:
16. ____
17. ____
18â20. The three categories of units to be assigned cost for anaccounting period in a process cost system are:
18. ____
19. ____
20. ____
21â24. Department W had 8,000 units in work in process that were30% converted at the beginning of the period at a cost of $16,400.During the period, 15,000 units of direct materials were added at acost of $48,000, 16,000 units were completed, and 7,000 units were40% completed. The first-in, first-out cost method is used and allmaterials are added at the beginning of the process. Direct laborwas $30,000, and factory overhead was $54,000 during theperiod.
21. The number of equivalent units of conversion for the period was21. ____
22. The total conversion costs for the period were 22. $____
23. The conversion cost of the units started and completed duringthe period was 23. $____
24. The conversion cost of the 7,000 units in process at the end ofthe period was 24. $____
Indicate the titles of the accounts to be debited and creditedin recording the selected transactions given below by inserting theletter or letters of the account titles listed in the appropriatecolumns. (Do not record the amounts.)
ACCOUNTS
A. Accounts Payable E. FactoryOverheadâDepartment A I. Sales
B. Accounts Receivable F.Factory OverheadâDepartment B J. Wages Payable
C. Cash G. Finished GoodsK. Work in ProcessâDepartment A
D. Cost of Goods Sold H.Materials L. Work inProcessâDepartment B
TRANSACTIONS | Debit | Credit | ||
0. Paid cash for wages owed, $47,000............................................................. | J | 0. ____ | C | 0. ____ |
1-2. Materials requisitioned for use in Department A,$36,000, of which $31,500 entered directly into the product..................................................... |
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3-4. Labor in Department A, $13,000, was used directlyin the manufacture of the product..................................................................................................... |
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5-6. Factory overhead applied to production inDepartment A, $6 per machine hour..................................................................................................... |
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7-8. Goods finished in Department A and transferred toDepartment B, $79,000............................................................................................................... |
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9-10. Goodsfinished in Department B and transferred to finished goods,$114,000............................................................................................................. |
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11-12. Cost of finishedgoods sold, $126,374......................................................... | 11. ____ | 12. ____ |