Financial and Managerial Accounting (Looseleaf) (Custom Package)
Financial and Managerial Accounting (Looseleaf) (Custom Package)
6th Edition
ISBN: 9781259754883
Author: Wild
Publisher: MCG
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Chapter 15, Problem 3PSB

1.

To determine

To prepare:

Job cost sheet for each job.

1.

Expert Solution
Check Mark

Explanation of Solution

Job cost sheet for job number 487.

Job Number:487
Particular Amount
($)
Materials 30,000
Labor 8,000
Overhead 16,000
Total Cost 54,000

Table (1)

Hence, the total cost is $54,000.

Working Note:

Given,

Overhead rate is 200%.

Formula to calculate the applied overhead:

Appliedoverhead=Directlaborcost×Overheadrate

Substitute $8,000 for direct labor cost and 200% for overhead rate,

Appliedoverhead=$8,000×200%=$16,000

Hence, applied overhead is $16,000.

Job cost sheet for job number 137

Job Number:488
Particular Amount
($)
Materials 20,000
Labor 7,000
Overhead 14,000
Total Cost 41,000

Table (2)

Hence, the total cost is $41,000.

Working Note:

Given,

Overhead rate is 200%.

Formula to calculate the applied overhead:

Appliedoverhead=Directlaborcost×Overheadrate

Substitute $7,000 for direct labor cost and 200% for overhead rate,

Appliedoverhead=$7,000×200%=$14,000

Hence, applied overhead is $14,000.

Job cost sheet for job number 489

Job Number:489
Particular Amount
($)
Materials 12,000
Labor 25,000
Overhead 50,000
Total Cost 87,000

Table (3)

Hence, the total cost is $87,000.

Working Note:

Given,

Overhead rate is 200%.

Formula to calculate the applied overhead:

Appliedoverhead=Directlaborcost×Overheadrate

Substitute $25,000 for direct labor cost and 200% for overhead rate,

Appliedoverhead=$25,000×200%=$50,000

Hence, applied overhead is $75,000.

Job cost sheet for job 490

Job Number:490
Particular Amount
($)
Materials 14,000
Labor 26,000
Overhead 52,000
Total Cost 92,000

Table (4)

Hence, the total cost is $92,000.

Working Note:

Given,

Overhead rate is 200%.

Formula to calculate the applied overhead:

Appliedoverhead=Directlaborcost×Overheadrate

Substitute $26,000 for direct labor cost and 200% for overhead rate,

Appliedoverhead=$26,000×200%=$52,000

Hence, applied overhead is $52,000.

Job cost sheet for job 491

Job Number:491
Particular Amount
($)
Materials 4,000
Labor 2,000
Overhead 4,000
Total Cost 10,000

Table (5)

Hence, the total cost is $10,000.

Working Notes:

Given,

Overhead rate is 200%.

Formula to calculate the applied overhead,

Appliedoverhead=Directlaborcost×Overheadrate

Substitute $2,000 for direct labor cost and 200% for overhead rate.

Appliedoverhead=$2,000×200%=$4,000

Hence, applied overhead is $4,000.

2.

To determine

To prepare:

The journal entries.

2.

Expert Solution
Check Mark

Explanation of Solution

a.

Journal entry to record material purchases on credit.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Purchase of Raw Materials   125,000  
  Accounts Payable     125,000
  (To record material purchases on credit      

Table (6)

• Purchase of raw materials is an asset account. Raw material increases as the new raw materials has been brought to the business that increases the assets and all the assets are debited as their values increases.

• Account payable is a liability account. Account payable increases as the raw materials are purchased on credit, hence the liability increases and all the liabilities are credited as their values decreases.

b

Journal entry to record the assign raw materials cost to work in process inventory.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Work in Process Inventory   80,000  
  Raw Materials Inventory     80,000
  (To record raw materials assign to job)      

Table (7)

• Work in process inventory is an asset account. The account increases as the raw materials are used in work in process that increases the balance of the work in process inventory account, hence it is debited.

• Raw materials inventory is an asset account. The account decreases as the raw materials are used in the work in process.

Working Note:

Given,

Raw material to job 487 is $30,000.

Raw material to job 488 is $20,000.

Raw material to job 489 is $12,000.

Raw material to job 490 is $14,000.

Raw material to job 491 is $4,000.

Computation of total direct materials:

Totaldirectmaterials=(Raw materials to job 487+Raw materials to job 488+Raw materials to job 489+Raw materials to job 490+Raw materials to job 491)=$30,000+$20,000+$12,000+$14,000+$4,000=$80,000

Hence, the total direct materials are $80,000.

Journal entry to record indirect material costing $19,500

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Factory Overhead   12,000  
  Inventory-Raw Material     12,000
  (To record the overhead cost)      

Table (8)

• Factory overhead is an expense account. Factory overhead increases as there is an indirect expense and all the expenses are debited.

• Inventory raw materials are an asset account. Inventory decreases as the expense is not directly related to the production and all the assets are credited as their value decreases.

c.

Journal entry to record the expense for computer program for cash

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Factory Overhead   11,000  
  Cash     11,000
  (To record the overhead cost)      

Table (9)

• Factory overhead is an expense account. The account increases as the expense is paid and all the expenses and losses are debited.

• Cash is an asset account. Cash account decreases as the amount paid for the expense is paid in cash, hence asset decreases and it is credited.

d.

Journal entry to record to assign direct labor to job

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Work in Process Inventory   68,000  
  Cash     68,000
  (To record cost of direct labor to job)      

Table (10)

• Work in process inventory is an asset account. The account increases as the direct labor has been used in work in process inventory that increases the asset, hence it is debited.

• Cash is an asset account. Cash account decreases as the amount paid for the expense is paid in cash, hence asset decreases and it is credited.

Journal entry to record the expense for computer program for cash

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Factory Overhead   16,000  
  Cash     16,000
  (To record the overhead cost)      

Table (11)

• Factory overhead is an expense account. The account increases as the expense is paid and all the expenses and losses are debited.

• Cash is an asset account. Cash account decreases as the amount paid for the expense is paid in cash, hence asset decreases and it is credited.

Working Note:

Given,

Direct labor to job 136 is $12,000.

Direct labor to job 137 is $10,500.

Direct labor to job 138 is $37,500.

Direct labor to job 139 is $39,000.

Direct labor to job 140 is $3,000.

Computation of total direct labor:

TotalDirectlabor=(Direct labor to job 136+Direct labor to job137+Direct labor to job138+Direct labor to job139+Direct labor to job140)=$12,000+$10,500+$37,500+$39,000+$3,000=$102,000

Total direct labor is $102,000.

Journal entry to record indirect labor

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Factory Overhead   24,000  
  Factory Wages Payable     24,000
  (To record the overhead cost)      

Table (12)

• Factory overhead is an expense account. Factory overhead increases as there is an indirect labor and all the expenses are debited.

• Factory Wages payable is an expense account. The account decreases as the balance of the indirect labor is transferred to factory overhead, hence it is credited.

e.

Journal entry to record overhead applied.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Work in Process   118,000  
  Overhead     118,000
  (To assign cost of overhead to job)      

Table (13)

• Work in process is an asset account. The account increases as the overhead is assigned to job as this increase the work in process, hence it is debited.

• Overhead is an expense account. The Account decreases as the overhead is assigned and transferred to work in process, hence it is credited.

Working Note:

Given,

Direct labor to job 487 is $8,000.

Direct labor to job 488 is $25,000.

Direct labor to job 489 is $26,000.

Overhead rate is 200%.

Computation of direct labor cost of following jobs:

Directlaborcost=(Direct labor to job 487+Direct labor to job 488+Direct labor to job 489)=$8,000+$25,000+$26,000=$59,000

Labor cost is $59,000

Computation of applied overhead:

Appliedoverhead=Directlaborcost×Overheadrate=$59,000×200%=$118,000

Hence, applied overhead is $118,000.

f.

Journal entry to record the transfer of the job 136, 138 and 139 to finished goods.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Finished Goods Inventory   178,100  
  Work in Process Inventory     178,100
  (To transfer jobs into finished goods)      

Table (14)

• Finished goods are an asset account. The account increases as the balance of the account increases as the jobs has been transferred to this account, hence it is debited.

• Work in process inventory is an asset account. The account decreases as the balance is transferred to finished account, hence it is credited.

Working Notes:

Given,

Raw material to job 487 is $30,000.

Raw material to job 489 is $12,000.

Raw material to job 490 is $14,000.

Direct labor to job 487 is $8,000.

Direct labor to job 489 is $25,000.

Direct labor to job 490 is $26,000.

Computation of the total amount transferred to finished goods:

Totalamounttransferred=(Raw materials to job 487+Raw materials to job 489+Raw materials to job 490+Direct labor to job 487+Direct labor to job 489+Direct labor to job 490+Overheadsapplied)=($30,000+$12,000+$14,000+$8,000+$25,000+$26,000+$118,000)=$233,000

Total amount transferred is $233,000.

g.

Journal entry to record the entry for sale

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Accounts Receivable   340,000  
  Sales     340,000
  (To record the entry for sale)      

Table (15)

• Accounts receivable is an asset. The account increases as sales has been made, therefore the debtors increase and it is debited.

• Sales are a revenue account. As revenue increases it is credited.

Journal entry to record the entry for cost of goods sold

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Cost of Goods Sold   141,000  
  Finished Goods Inventory     141,000
  (To record the entry for sale)      

Table (16)

• Cost of goods sold is an expense for the company which increases the balance of expenses and loss account. Therefore, the cost of goods sold would be debited.

• Inventory is an asset account and it’s transferred into sales reduces the asset account. Therefore, finished goods account would be credited.

Working Note:

Given,

Raw material to job 487 is $30,000.

Raw material to job 489 is $12,000.

Direct labor to job 487 is $8,000.

Direct labor to job 489 is $25,000.

Overhead rate is 200%.

Computation of direct labor cost of following jobs,

Directlaborcost=(Direct labor to job 487+Direct labor to job 489)=$8,000+$25,000=$33,000

Labor cost is $33,000.

Computation of applied overhead,

Appliedoverhead=Directlaborcost×Overheadrate=$33,000×200%=$66,000

Hence, applied overhead is $66,000.

Computation of the cost of goods sold,

Cost of goods sold=(Raw materials to job 487+Raw materials to job 489+Direct labor to job 487+Direct labor to job 489+Overheadsapplied)=$30,000+$12,000+$8,000+$25,000+$66,000=$141,000

Total amount transferred is $141,000

h.

Journal entry to record other factory overhead

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Factory Overhead   96,000  
  Accumulated Depreciation on Building     37,000
  Accumulated Depreciation on Equipment     21,000
  Prepaid Insurance     7,000
  Property Tax Payable     31,000
  (To record the other factory overhead)      

Table (17)

• Factory overhead is an expense account. Factory overhead increases as there is another overhead recorded and all the expenses are debited.

• Accumulated depreciation on building is a contra asset account. The account has a credit balance and account increases, hence it is credited.

• Accumulated depreciation on equipment is a contra asset account. The account has a credit balance and account increases, hence it is credited.

• Prepaid insurance is a liability account for company. The account increases as the liability is created, hence it is credited.

• Property tax payable is a liability account for company. The account increases as the liability is created, hence it is credited.

i.

Journal entry to record overhead applied.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Work in Process   18,000  
  Overhead     18,000
  (To assign cost of overhead to job)      

Table (18)

• Work in process is an asset account. The account increases as the overhead is assigned to job as this increase the work in process, hence it is debited.

• Overhead is an expense account. The Account decreases as the overhead is assigned and transferred to work in process, hence it is credited.

Working Note:

Given,

Direct labor to job 488 is $7,000.

Direct labor to job 491 is $2,000.

Overhead rate is 200%.

Computation of total labor of job 488 and job 491:

TotalLabor=Direct labor to job 137+Direct labor to job 140=$7,000+$2,000=$9,000

Total labor is $9,000.

Computation of applied overhead,

Appliedoverhead=Directlaborcost×Overheadrate=$9,000×200%=$18,000

Hence, applied overhead is $18,000.

3.

To determine

To prepare:

T accounts.

3.

Expert Solution
Check Mark

Explanation of Solution

T account for raw material

Raw Materials
Date Particular Debit
($)
Date Particular Credit
($)
  Accounts payable 125,000   Work in process inventory 80,000
        Factory overhead 12,000
        Balance c/f 33,000
    125,000     125,000

Table (19)

T account for work in process.

Work in Process
Date Particular Debit
($)
Date Particular Credit
($)
  Raw materials inventory 80,000   Finished goods inventory 233,000
  Factory wage payable 68,000   Balance c/f 51,000
  Factory overhead 118,000      
  Factory overhead 18,000      
    284,000     284,000

Table (20)

T account for finished goods inventory.

Finished Goods Inventory
Date Particular Debit
($)
Date Particular Credit
($)
  Work in process inventory 233,000   Cost of goods sold 141,000
        Balance c/f 92,000
    233,000     233,000

Table (21)

T account for factory overhead.

Factory Overhead
Date Particular Debit
($)
Date Particular Credit
($)
  Raw materials inventory 12,000   Work in process inventory 118,000
  Cash 11,000   Work in process inventory 18,000
  Factory wages payable 16,000      
  Accumulated Depreciation 58,000      
  Prepaid insurance 7,000      
  Property tax payable 31,000      
  Balance c/f 1,000      
    136,000     136,000

Table (22)

T account for cost of goods sold.

Cost of Goods Sold
Date Particular Debit
($)
Date Particular Credit
($)
  Finished goods inventory 141,000   Balance c/f 141,000
    141,000     141,000

Table (23)

4.

To determine

To compute:

The total cost of each job.

4.

Expert Solution
Check Mark

Explanation of Solution

Work in process inventory.

Work in process inventory
Particulars Amount
Job 488 41,000
Job 491 10,000
Total work in process 51,000

Table (24)

Finished goods

Finished goods
Particulars Amount
Job 490 92,000
Total finished goods 139,400

Table (25)

Cost of goods sold

Cost of goods sold
Particulars Amount
Job 487 54,000
Job 489 87,000
Total Cost of goods sold 141,000

Table (26)

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Chapter 15 Solutions

Financial and Managerial Accounting (Looseleaf) (Custom Package)

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