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Kapoor Company uses job-order costing. During January, the following data were reported:
a. Materials purchased on account: direct materials, $98,500; indirect materials, $14,800.
b. Materials issued: direct materials, $82,500; indirect materials, $8,800.
c. Labor cost incurred: direct labor, $67,000; indirect labor, $18,750.
d. Other manufacturing costs incurred (all payables), $46,200.
e. Overhead is applied on the basis of 110 percent of direct labor cost.
f. Work finished and transferred to Finished Goods Inventory cost $230,000.
g. Finished goods costing $215,000 were sold on account for 140 percent of cost.
h. Any over- or underapplied overhead is closed to Cost of Goods Sold.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare a T-account for Overhead Control. Post all relevant information to this account. What is the ending balance in this account?
3. Prepare a T-account for Work-in-Process Inventory. Assume a beginning balance of $10,000, and post all relevant information to this account. Did you assign any actual overhead costs to Work-in-Process Inventory? Why or why not?

Respuesta :

Zviko

Answer:

Required 1

a.

Direct materials $98,500 (debit)

Indirect materials $14,800 (debit)

Trade Payable $113,300 (credit)

b.

Work in Process : direct materials $82,500 (debit)

Work in Process :  indirect materials $8,800 (debit)

Direct material $82,500 (credit)

Indirect material $8,800 (credit)

c.

Work In Process: direct labor $67,000  (debit)

Work In Process: indirect labor $18,750  (debit)

Salaries Payable $85,750 (credit)

d.

Overheads $46,200 (debit)

Trade Payables $46,200 (credit)

e.

Work in Process $73,700 (debit)

Overheads $73,700 (credit)

f.

Finished goods Inventory $230,000 (debit)

Work in Process $230,000 (credit)

g.

Trade Receivable $301,000 (debit)

Cost of goods sold  $215,000 (debit)

Inventory  $215,000 (credit)

Sales Revenue $301,000 (credit)

h.

Overheads $27,500 (debit)

Cost of Sales $27,500 (credit)

Required 2

Overheads Account

Debit :

Trade Payables        $46,200

Over- applied           $27,500

Total                          $73,700

Credit :

Work in Process       $73,700

Total                          $73,700

Required 3

Work In Process  Account

Debit :

Beginning balance                $10,000

Direct material                      $82,500

Direct labor                           $67,000

Overheads                             $73,700

Total                                     $233,200

Credit :

Finished goods Inventory  $230,000

Ending Balance                       $3,200

Total                                     $233,200

Why use applied overheads instead of actual overheads

We assign applied overheads to Work-in-Process Inventory. This is because   the actuals are usually not readily available to costs the products and determine selling prices. The actuals are available later during the end of the period and using these, we would delay the product costing and pricing seasons.

Explanation:

Required 1

Theses are journal entries. Accumulate the production costs in the Work In Process Inventory Account. When units are completed, the cost from the Work In Process to the Finished Goods Account.

Required 2

This is the overheads Account. On the debit side of this account we record the overheads actually incurred during the production period. On the credit side we record the overheads applied. The balance of this account is either overapplied (debit) or under-applied (credit). In our case, we had an overapplied situation (debit).

Required 3

This is the Work-in-Process Account. Make sure to include the applied overheads instead of actual overheads.

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