Managerial Accounting
Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 2, Problem 3PSA

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 136.

    Job Number:136
    Particular Amount ($)
    Materials 48,000
    Labor 12,000
    Overhead 24,000
    Total Cost 84,000
    Table (1)

Hence, the total cost is $84,000.

Working note:

Given,
Overhead rate is 200%.

Formula to calculate the applied overhead,

    Appliedoverhead=Directlaborcost×Overheadrate

Substitute $12,000 for direct labor cost and 200% for overhead rate.

    Appliedoverhead=$12,000×200% =$24,000

Hence, applied overhead is $24,000.

Job cost sheet for job number 137

    Job Number:137
    Particular Amount ($)
    Materials 32,000
    Labor 10,500
    Overhead 21,000
    Total Cost 63,500
    Table (2)

Hence, the total cost is $63,500.

Working note:

Given,
Overhead rate is 200%.

Formula to calculate the applied overhead,

    Appliedoverhead=Directlaborcost×Overheadrate

Substitute $10,500 for direct labor cost and 200% for overhead rate.

    Appliedoverhead=$10,500×200% =$21,000

Hence, applied overhead is $21,000.

Job cost sheet for job number 138

    Job Number:138
    Particular Amount ($)
    Materials 19,200
    Labor 37,500
    Overhead 75,000
    Total Cost 131,700
    Table (3)

Hence, the total cost is $131,700.

Working Notes:

Given,
Overhead rate is 200%.

Formula to calculate the applied overhead,

    Appliedoverhead=Directlaborcost×Overheadrate

Substitute $37,500 for direct labor cost and 200% for overhead rate.

    Appliedoverhead=$37,500×200% =$75,000

Hence, applied overhead is $75,000.

Job cost sheet for job 139.

    Job Number:139
    Particular Amount ($)
    Materials 22,400
    Labor 39,000
    Overhead 78,000
    Total Cost 139,400
    Table (4)

Hence, the total cost is $139,400.

Working note:

Given,
Overhead rate is 200%.

Formula to calculate the applied overhead,

    Appliedoverhead=Directlaborcost×Overheadrate

Substitute $39,000 for direct labor cost and 200% for overhead rate.

    Appliedoverhead=$39,000×200% =$78,000

Hence, applied overhead is $78,000.

Job cost sheet for job 140.

    Job Number:140
    Particular Amount ($)
    Materials 6,400
    Labor 3,000
    Overhead 6,000
    Total Cost 15,400
    Table (5)

Hence, the total cost is $15,400.

Working note:

Given,
Overhead rate is 200%.

Formula to calculate the applied overhead,

    Appliedoverhead=Directlaborcost×Overheadrate

Substitute $3,000 for direct labor cost and 200% for overhead rate.

    Appliedoverhead=$3,000×200% =$6,000

Hence, applied overhead is $6,000.

2.

To determine

To prepare: Journal entries.

2.

Expert Solution
Check Mark

Explanation of Solution

a.

To record material purchases on credit.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Purchase of raw materials 200,000
    Accounts payable 200,000
    (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.

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

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work in Process inventory 128,000
    Raw materials inventory 128,000
    (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 Notes:

Given,
Raw material to job 136 is $48,000.
Raw material to job 137 is $32,000.
Raw material to job 138 is $19,200.
Raw material to job 139 is $22,400.
Raw material to job 140 is $6,400.

Computation of total direct materials,
Totaldirectmaterials=( Raw materials to job 136+Raw materials to job 137 +Raw materials to job 138+Raw materials to job 139 +Raw materials to job 140 ) =$48,000+$32,000+$19,200+$22,400+$6,400 =$128,000

Hence, the total direct materials are $128,000.

To record indirect material costing $19,500.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Factory Overhead account 19,500
    Inventory-raw material 19,500
    (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.

To record the expense for computer program for cash

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Factory Overhead account 19,500
    Cash 19,500
    (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.

To Record the entry to assign direct labor to job.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work in Process inventory 102,000
    Factory Wage Payable 102,000
    (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.
  • Factory Wage payable is an expense account. The account decreases as the expenses of direct labor are transferred to work in process inventory, hence 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.

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 (11)
  • 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.

To Record overhead applied.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work In Process 177,000
    Overhead 177,000
    (To assign cost of overhead to job)
    Table (12)
  • 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 136 is $12,000.
Direct labor to job 138 is $37,500.
Direct labor to job 139 is $39,000.
Overhead rate is 200%.

Computation of direct labor cost of following jobs,

    DirectLaborcost=( Direct labor to job 136+Direct labor to job 138 +Direct labor to job 139 ) =$12,000+$37,500+$39,000 =$88,500

Labor cost is $88,500

Computation of applied overhead,

    Appliedoverhead=Directlaborcost×Overheadrate =$88,500×200% =$177,000

Hence, applied overhead is $177,000.

f.

To record the entry to transfer 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 (13)
  • 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 note:

Given,
Raw material to job 136 is $48,000.
Raw material to job 138 is $19,200.
Raw material to job 139 is $22,400.
Direct labor to job 136 is $12,000.
Direct labor to job 138 is $37,500.
Direct labor to job 139 is $39,000.

Computation of the total amount transferred to finished goods.

    TotalAmountTransferred=( Raw materials to job 136+Raw materials to job 138 +Raw materials to job 139+Direct labor to job 136 +Direct labor to job 138+Direct labor to job 139 ) =( $48,000+$19,200+$22,400 +$12,000+$37,500+$39,000 ) =$178,100

Total amount transferred is $178,000.

g.

To record the entry for sale.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Accounts Receivable 525,000
    Sales 525,000
    (To record the entry for sale)
    Table (14)
  • 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.

h.

To Record other factory overhead.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Factory Overhead 149,500
    Accumulated Depreciation on Building 68,000
    Accumulated Depreciation on Equipment 36,500
    Prepaid Insurance 10,000
    Property Tax Payable 35,000
    (To record the other factory overhead)
    Table (15)
  • 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.

To Record overhead applied.

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work In Process 27,000
    Overhead 27,000
    (To assign cost of overhead to job)
    Table (16)
  • 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 137 is $10,500.
Direct labor to job 140 is $3,000.
Overhead rate is 200 %

Computation of total labor of job 137 and job 140,

    TotalLabor=Direct labor to job 137+Direct labor to job 140 =$10,500+$3,000 =$13,500

Total labor is $13,500.

Computation of applied overhead,

    AppliedOverhead=DirectLaborCost×OverheadRate =$13,500×200% =$27,000

Hence, applied overhead is $27,000.

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 200,000 Work in process inventory 128,000
    Factory Overhead 19,500
    Balance c/f 52,500
    200,000 200,00
    Table (17)

T account for work in process.

    Work in Process
    Date Particular Debit ($) Date Particular Credit ($)
    Raw materials inventory 128,000 Finished goods inventory 178,100
    Factory wage payable 102,000 Balance c/f 255.900
    Factory overhead 177,000
    Factory overhead 27,000
    434,000 434,000
    Table (18)

T account for finished goods inventory.

    Finished goods inventory
    Date Particular Debit ($) Date Particular Credit ($)
    Work in process inventory 178,100 Cost of goods sold 215,700
    Balance c/f 37,600
    215,700 215,700
    Table (19)

T account for factory overhead.

    Factory overhead
    Date Particular Debit ($) Date Particular Credit ($)
    Raw materials inventory 19,500 Work in process inventory 177,000
    Cash 15,000 Work in process inventory 27,000
    Factory wages payable 24,000
    Accumulated Depreciation 104,500
    Prepaid insurance 10,000
    Property tax payable 35,000
    Balance c/f 4,000
    204,000 204,000
    Table (20)

T account for cost of goods sold.

    Cost of goods sold
    Date Particular Debit ($) Date Particular Credit ($)
    Finished goods inventory 215,700 Balance c/f 215,700
    215,700 215,700
    Table (21)

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 137 63,500
    Job 140 15,400
    Total work in process 78,900
    Table (22)

Finished goods

    Finished goods
    Particulars Amount
    Job 139 139,400
    Total finished goods 139,400
    Table (23)

Cost of goods sold

    Cost of goods sold
    Particulars Amount
    Job 136 84,000
    Job 138 131,700
    Total Cost of goods sold 215,700
    Table (24)

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Chapter 2 Solutions

Managerial Accounting

Ch. 2 - Prob. 6DQCh. 2 - GOOGLE Google uses a “time ticket” for some...Ch. 2 - What events cause debits to be recorded in the...Ch. 2 - GOOGLE Google applies overhead to product costs....Ch. 2 - Prob. 10DQCh. 2 - 11. Why must a company use predetermined...Ch. 2 - Prob. 12DQCh. 2 - Prob. 13DQCh. 2 - Prob. 14DQCh. 2 - Prob. 1QSCh. 2 - Prob. 2QSCh. 2 - Prob. 3QSCh. 2 - Prob. 4QSCh. 2 - Prob. 5QSCh. 2 - Prob. 6QSCh. 2 - Prob. 7QSCh. 2 - Prob. 8QSCh. 2 - Prob. 9QSCh. 2 - Prob. 10QSCh. 2 - Prob. 11QSCh. 2 - Prob. 12QSCh. 2 - Prob. 13QSCh. 2 - Prob. 14QSCh. 2 - Job order productions C1 Refer to this chapter’s...Ch. 2 - Prob. 1ECh. 2 - Prob. 2ECh. 2 - Exercise 15-13 Analysis of cost flows C2 As of the...Ch. 2 - Prob. 4ECh. 2 - Prob. 5ECh. 2 - Prob. 6ECh. 2 - Exercise 15-7 Cost flows in a job order costing...Ch. 2 - Prob. 8ECh. 2 - Prob. 9ECh. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - Prob. 13ECh. 2 - Prob. 14ECh. 2 - Prob. 15ECh. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - Prob. 18ECh. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 1PSACh. 2 - Prob. 2PSACh. 2 - Prob. 3PSACh. 2 - Prob. 4PSACh. 2 - Prob. 5PSACh. 2 - Prob. 1PSBCh. 2 - Prob. 2PSBCh. 2 - Prob. 3PSBCh. 2 - Prob. 4PSBCh. 2 - Prob. 5PSBCh. 2 - SERIAL PROBLEM Business Solutions P1 P2 P3 (This...Ch. 2 - Prob. 1GLPCh. 2 - Prob. 1AACh. 2 - Prob. 2AACh. 2 - Apple and Samsung compete in the global...Ch. 2 - ETHICS CHALLENGE P3 BIN 15-3 Assume that your...Ch. 2 - COMMUNICATING IN PRACTICE C1 C2 BTN 15-4 Assume...Ch. 2 - Prob. 3BTNCh. 2 - Prob. 4BTNCh. 2 - Prob. 5BTNCh. 2 - Prob. 6BTN
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