Question

1. brandon manufacturing is a manufacturing firm that uses job - order costing. at the beginning of january, the companys inventory balances were as follows: raw materials: $24,200 work in process: $31,750 finished goods: $88,500 the company applies overhead to jobs using a predetermined overhead rate based on direct labour cost. at the beginning of the year, the company estimated that it incurs $253,440 in manufacturing overhead cost and spend $528,000 in direct labour. the following events took place in january: a.) raw materials purchased: $43,250. b.) raw materials requisitioned for use in production: $41,600 ($37,500 direct and $4,100 indirect). c.) the following employee costs were incurred: direct labour: $44,300 indirect labour: $4,650 administrative salaries: $12,180 d.) selling costs: $12,500 e.) factory utility costs: $857 f.) depreciation for the month: $10,600, of which $10,100 is related to factory operations and $500 is related to selling and administrative activities. g.) manufacturing overhead for january was applied to jobs. h.) cost of goods manufactured for january: $102,620. i.) sales for january: $220,720; the costs on the job cost sheets of the goods that were sold: $122,620. j.) the balance in the manufacturing overhead account for january was closed out to cost of goods sold. required: prepare the appropriate journal entry for each of the items above (a. through j.). you can assume that all transactions with employees, customers, and suppliers were conducted in cash.

Explanation:

Step1: Record raw materials purchase

Raw materials are increased and cash is decreased.
Debit: Raw Materials Inventory $43,250
Credit: Cash $43,250

Step2: Record raw materials requisition

Direct materials go to Work - in - Process, indirect materials go to Manufacturing Overhead.
Debit: Work - in - Process Inventory $37,500
Debit: Manufacturing Overhead $4,100
Credit: Raw Materials Inventory $41,600

Step3: Record employee costs

Direct labour goes to Work - in - Process, indirect labour to Manufacturing Overhead, administrative salaries to Administrative Expenses.
Debit: Work - in - Process Inventory $44,300
Debit: Manufacturing Overhead $4,650
Debit: Administrative Expenses $12,180
Credit: Cash $61,130

Step4: Record selling costs

Selling costs are an expense.
Debit: Selling Expenses $12,500
Credit: Cash $12,500

Step5: Record factory utility costs

Factory utility costs are part of manufacturing overhead.
Debit: Manufacturing Overhead $857
Credit: Cash $857

Step6: Record depreciation

Factory - related depreciation to Manufacturing Overhead, selling and administrative related to appropriate expense.
Debit: Manufacturing Overhead $10,100
Debit: Depreciation Expense - Selling and Administrative $500
Credit: Accumulated Depreciation $10,600

Step7: Calculate and apply manufacturing overhead

Predetermined overhead rate = $\frac{253,440}{528,000}= 0.48$
Applied overhead = $44,300\times0.48 = 21,264$
Debit: Work - in - Process Inventory $21,264
Credit: Manufacturing Overhead $21,264

Step8: Record cost of goods manufactured

Transfer cost of goods from Work - in - Process to Finished Goods.
Debit: Finished Goods Inventory $102,620
Credit: Work - in - Process Inventory $102,620

Step9: Record sales and cost of goods sold

Record revenue and cost of goods sold.
Debit: Cash $220,720
Credit: Sales Revenue $220,720
Debit: Cost of Goods Sold $122,620
Credit: Finished Goods Inventory $122,620

Step10: Close manufacturing overhead account

If Manufacturing Overhead has a balance, close it to Cost of Goods Sold.
First, find the balance in Manufacturing Overhead:
Manufacturing Overhead debits: $4,100 + 4,650+857 + 10,100=19,707$
Manufacturing Overhead credits: $21,264$
Balance = $19,707 - 21,264=- 1,557$ (credit balance)
Debit: Manufacturing Overhead $1,557
Credit: Cost of Goods Sold $1,557

Answer:

a. Debit: Raw Materials Inventory $43,250; Credit: Cash $43,250
b. Debit: Work - in - Process Inventory $37,500; Debit: Manufacturing Overhead $4,100; Credit: Raw Materials Inventory $41,600
c. Debit: Work - in - Process Inventory $44,300; Debit: Manufacturing Overhead $4,650; Debit: Administrative Expenses $12,180; Credit: Cash $61,130
d. Debit: Selling Expenses $12,500; Credit: Cash $12,500
e. Debit: Manufacturing Overhead $857; Credit: Cash $857
f. Debit: Manufacturing Overhead $10,100; Debit: Depreciation Expense - Selling and Administrative $500; Credit: Accumulated Depreciation $10,600
g. Debit: Work - in - Process Inventory $21,264; Credit: Manufacturing Overhead $21,264
h. Debit: Finished Goods Inventory $102,620; Credit: Work - in - Process Inventory $102,620
i. Debit: Cash $220,720; Credit: Sales Revenue $220,720; Debit: Cost of Goods Sold $122,620; Credit: Finished Goods Inventory $122,620
j. Debit: Manufacturing Overhead $1,557; Credit: Cost of Goods Sold $1,557