Question

PROBLEM 2 BUILDING BLOCKS + JOB COSTING Seaway, Inc. manufactures outboard motors and other marine equipment. The company uses a job-order costing system. Manufacturing overhead is applied on the basis of machine hours. Estimated manufacturing overhead for the year is $1,520,200, and management expects that 69,100 machine hours will be used.

REQUIRED: Prepare journal entries to record the following events, which occurred during May:

a) The company purchased marine propellers and metal tubing for $11,040 on account. b) A requisition was filed by the Gauge Department supervisor for 280 pounds of clear plastic. The material cost 70¢ per pound when it was purchased. c) The Motor Testing Department supervisor requisitioned 320 feet of electrical wire, which is considered an indirect material. The wire cost 10¢ per foot when it was purchased. d) An electric utility bill of $100 was paid in cash. Of the total bill, 25% is related to the company’s sales office located adjacent to the plant.

Answer 1

Solution:

Journal Entries - Seaway Inc.
Event	Particulars	Debit	Credit
a	Raw material inventory Dr	$11,040.00
	To Accounts payable		$11,040.00
	(To record purchase of material on account)
b	Work In Process Inventory Dr	$196.00
	To Raw material inventory		$196.00
	(To record material issued to production)
c	Manufacturing overhead Dr	$32.00
	To Raw material inventory		$32.00
	(To record indirect material issued to production)
d	Manufacturing overhead Dr	$75.00
	Selling and administrative expenses Dr	$25.00
	To Cash		$100.00
	(To record payment of electricity bill)