Question

The following information is taken from the accounts of Latta Company. The entries in the T-accounts...

The following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year.

Manufacturing Overhead
(a) 506,880 (b) 422,400
Bal. 84,480
Work in Process
Bal. 2,600 (c) 790,000
330,000
95,000
(b) 422,400
Bal. 60,000
Finished Goods
Bal. 30,000 (d) 680,000
(c) 790,000
Bal. 140,000
Cost of Goods Sold
(d) 680,000

The overhead that had been applied to production during the year is distributed among Work in Process, Finished Goods, and Cost of Goods Sold as of the end of the year as follows:

Work in Process, ending $ 28,800
Finished Goods, ending 67,200
Cost of Goods Sold 326,400
Overhead applied $ 422,400

For example, of the $60,000 ending balance in work in process, $28,800 was overhead that had been applied during the year.

Required:

1. Identify reasons for entries (a) through (d).

2. Assume that the underapplied or overapplied overhead is closed to Cost of Goods Sold. Prepare the necessary journal entry.

3. Assume that the underapplied or overapplied overhead is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the necessary journal entry.  ROUNDING - Do NOT round the intermediate calculations (when you are calculate the percentage that each account represents of the total of all three accounts, do NOT round that amount, leave it in your calculator).

Homework Answers

Answer #1

1.) Reasons for entries

a) Actual manufacturing overhead

b) Applied manufacturing overhead

c) Cost of goods manufactured

d) Cost of goods sold

2) Adjusting entry

Date account and explanation Debit Credit
Cost of goods sold 84480
Manufacturing overhead 84480

3) Adjusting entry

Date account and explanation Debit Credit
Work in process 5760
Finished goods 13440
Cost of goods sold 65280
Manufacturing overhead 84480
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