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Sierra Company manufactures woven blankets and accounts for product
costs using process costing. Data below are for one of its
processing departments. The following information is available
regarding its May inventories
| Beginning Inventory |
Ending Inventory |
|||||
| Raw materials inventory | $ | 66,000 | $ | 43,000 | ||
| Work in process inventory | 404,000 | 541,000 | ||||
| Finished goods inventory | 602,000 | 532,000 | ||||
The following additional information describes the company's
production activities for May.
| Raw materials purchases (on credit) | $ | 250,000 | |
| Factory wages cost (paid in cash) | 1,562,000 | ||
| Other overhead cost (Other Accounts credited) | 98,000 | ||
| Materials used | |||
| Direct | $ | 195,000 | |
| Indirect | 78,000 | ||
| Labor used | |||
| Direct | $ | 790,000 | |
| Indirect | 772,000 | ||
| Overhead rate as a percent of direct labor | 120 | % | |
| Sales (on credit) | $ | 5,500,000 | |
The predetermined overhead rate was computed at the beginning of
the year as 120% of direct labor cost.
2. Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (h) overhead applied, (i) goods transferred from production to finished goods, and (j) sale of finished goods.
Journal entry
| No | General journal | Debit | Credit |
| a | Raw material | 250000 | |
| Account payable | 250000 | ||
| b | Work in process | 195000 | |
| Raw material | 195000 | ||
| c | Manufacturing overhead | 78000 | |
| Raw material | 78000 | ||
| d | Work in process | 790000 | |
| Wages payable | 790000 | ||
| e | Manufacturing overhead | 772000 | |
| Wages payable | 772000 | ||
| f | Wages payable | 1562000 | |
| Cash | 1562000 | ||
| g | Manufacturing overhead | 98000 | |
| Other account | 98000 | ||
| h | Work in process | 948000 | |
| Manufacturing overhead (790000*1.2) | 948000 | ||
| i | Finished goods | 1796000 | |
| Work in process | 1796000 | ||
| j | Account receivable | 5500000 | |
| Sales revenue | 5500000 | ||
| Cost of goods sold | 1866000 | ||
| Finished goods | 1866000 | ||
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