Question

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $211,000.
2. Raw materials used in production, $190,000 ($152,000 direct materials and $38,000 indirect materials).
3. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000.
4. Depreciation recorded on factory equipment, $105,000.
5. Other manufacturing overhead costs accrued during October, $129,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $7 per machine-hour. A total of 76,300 machine-hours were used in October.
7. Jobs costing $511,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $448,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 34% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $37,000.

Answer 1

1.

Journal Enteries - Polaris Company
S. No	General Journal	Debit	Credit
a	Raw Material Inventory Dr	$2,11,000.00
	To Accounts Payable		$2,11,000.00
	(Raw material purchased on account)
b	Work In Process Dr	$1,52,000.00
	Manufacturing Overhead Dr	$38,000.00
	To Raw Material Inventory		$1,90,000.00
	(Being Raw material used in production)
c	Work In Process Dr	$49,000.00
	Manufacturing Overhead Dr	$21,000.00
	To Wages Payable		$70,000.00
	(Being labor cost accrued)
d	Manufacturing overhead Dr	$1,05,000.00
	To Accumulated depreciation - Factory Equipment		$1,05,000.00
	(Being depreciation charged on factory equipment)
e	Manufacturing overhead Dr	$1,29,000.00
	To Accounts Payable		$1,29,000.00
	(Being other manufacturing overhead cost incurred)
f	Work In Process Dr (76300 * $7)	$5,34,100.00
	To Manufacturing overhead		$5,34,100.00
	(Being manufacturing overhead applied to prodcution)
g	Finished Goods Inventory Dr	$5,11,000.00
	To Work In Process		$5,11,000.00
	(Being cost of completed goods transferred to finished goods)
h-1	Cost of goods sold Dr	$4,48,000.00
	To Finished Goods Inventory		$4,48,000.00
	(Being cost of unit sold transferred to COGS)
h-2	Accounts Receivables Dr ($448000*134%)	$6,00,320.00
	To Sales Revenue		$6,00,320.00
	(To record sales on account)

2.

Manufacturing Overhead Account
Particulars	Debit	Particulars	Credit
To Raw material inventory	$38,000.00	By Work In Process	$5,34,100.00
To Wages Payable	$21,000.00
To Accumulated depreciation - Factory Equipment	$1,05,000.00
To Accounts Payable	$1,29,000.00
To Ending balance	$2,41,100.00
Total	$5,34,100.00	Total	$5,34,100.00

Work in Process Account
Particulars	Debit	Particulars	Credit
To Beginning Balance	$37,000.00	By Finished goods inventory	$5,11,000.00
To Raw Material Inventory	$1,52,000.00	By Ending balance	$2,61,100.00
To Wages Payable	$49,000.00
To Manufacturing overhead applied	$5,34,100.00
Total	$7,72,100.00	Total	$7,72,100.00