Bergo Bay's accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded.
Debit Credit Cash $ 70,000 Accounts receivable 39,000 Raw materials inventory 24,500 Work in process inventory 0 Finished goods inventory 15,000 Prepaid rent 5,000 Accounts payable $ 11,800 Notes payable 14,800 Common stock 50,000 Retained earnings (prior year) 94,000 Sales 158,900 Cost of goods sold 112,000 Factory overhead 28,000 General and administrative expenses 36,000 Totals $ 329,500 $ 329,500
These six documents must be processed to bring the accounting records up to date.
Materials requisition 10: $ 4,400 direct materials to Job 402 Materials requisition 11: $ 7,800 direct materials to Job 404 Materials requisition 12: $ 2,400 indirect materials Labor time ticket 52: $ 7,000 direct labor to Job 402 Labor time ticket 53: $ 13,000 direct labor to Job 404 Labor time ticket 54: $ 5,000 indirect labor
Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost.
Problem 19-3A (Algo) Part 2
2-a. In Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead.
Factory Overhead
Actual overhead (given)
28,000
Overhead applied
Indirect materials
2,400
Indirect labor
5,000
Underapplied overhead
2-b. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.
Journal entry worksheet
Record the entry to allocate any overapplied or underapplied overhead.
Note: Enter credits before debits
Date
General Journal
Debit
Credit
December 31
Bergo Bay's accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded.
Debit Credit Cash $ 70,000 Accounts receivable 39,000 Raw materials inventory 24,500 Work in process inventory 0 Finished goods inventory 15,000 Prepaid rent 5,000 Accounts payable $ 11,800 Notes payable 14,800 Common stock 50,000 Retained earnings (prior year) 94,000 Sales 158,900 Cost of goods sold 112,000 Factory overhead 28,000 General and administrative expenses 36,000 Totals $ 329,500 $ 329,500
These six documents must be processed to bring the accounting records up to date.
Materials requisition 10: $ 4,400 direct materials to Job 402 Materials requisition 11: $ 7,800 direct materials to Job 404 Materials requisition 12: $ 2,400 indirect materials Labor time ticket 52: $ 7,000 direct labor to Job 402 Labor time ticket 53: $ 13,000 direct labor to Job 404 Labor time ticket 54: $ 5,000 indirect labor
Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost.
Problem 19-3A (Algo) Part 2
2-a. In Factory Overhead T-account, enter amounts from part 1 related to factory overhead. Determine the amount of over- or underapplied overhead.
| Factory Overhead |
| Actual overhead (given) | 28,000 | Overhead applied | |
| Indirect materials | 2,400 | ||
| Indirect labor | 5,000 | ||
| Underapplied overhead |
2-b. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.
| Date | General Journal | Debit | Credit |
| December 31 | |||
Related questions
The following selected account balances are provided for Delray Mfg.
| Sales | $ | 1,250,000 |
| Raw materials inventory, Dec. 31, 2016 | 37,000 | |
| Work in process inventory, Dec. 31, 2016 | 53,900 | |
| Finished goods inventory, Dec. 31, 2016 | 62,750 | |
| Raw materials purchases | 175,600 | |
| Direct labor | 225,000 | |
| Factory computer supplies used | 17,840 | |
| Indirect labor | 47,000 | |
| Repairs—Factory equipment | 5,250 | |
| Rent cost of factory building | 57,000 | |
| Advertising expense | 94,000 | |
| General and administrative expenses | 129,300 | |
| Raw materials inventory, Dec. 31, 2017 | 42,700 | |
| Work in process inventory, Dec. 31, 2017 | 41,500 | |
| Finished goods inventory, Dec. 31, 2017 | 67,300 |
Prepare an income statement for Delray Mfg. (a manufacturer).
Analyzing Manufacturing Cost Accounts
Big Wave Company manufactures surf boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for July:
| Materials | |||||
|---|---|---|---|---|---|
| July 1 | Balance | 36,400 | July 31 | Requisitions | (A) |
| July 31 | Purchases | 146,400 | |||
| Work in Process | |||||
|---|---|---|---|---|---|
| July 1 | Balance | (B) | July 31 | Completed jobs | (F) |
| July 31 | Materials | (C) | |||
| July 31 | Direct labor | (D) | |||
| July 31 | Factory overhead applied | (E) | |||
| Finished Goods | |||||
|---|---|---|---|---|---|
| July 1 | Balance | 0 | July 31 | Cost of goods sold | (G) |
| July 31 | Completed jobs | (F) | |||
| Wages Payable | |||||
|---|---|---|---|---|---|
| July 31 | Wages incurred | 116,300 | |||
| Factory Overhead | |||||
|---|---|---|---|---|---|
| July 1 | Balance | 21,700 | July 31 | Factory overhead applied | (E) |
| July 31 | Indirect labor | (H) | |||
| July 31 | Indirect materials | 19,500 | |||
| July 31 | Other overhead | 58,700 | |||
In addition, the following information is available:
Materials and direct labor were applied to six jobs in July:
| Job No. | Style | Quantity | Direct Materials | Direct Labor | ||||||||
| No. 21 | X-10 | 200 | $25,600 | $15,000 | ||||||||
| No. 22 | X-20 | 390 | 40,620 | 26,000 | ||||||||
| No. 23 | X-50 | 170 | 14,500 | 7,000 | ||||||||
| No. 24 | T-20 | 250 | 39,250 | 25,000 | ||||||||
| No. 25 | X-40 | 180 | 26,380 | 16,000 | ||||||||
| No. 26 | T-10 | 130 | 9,390 | 4,000 | ||||||||
| Total | 1,320 | $155,740 | $93,000 | |||||||||
Factory overhead is applied to each job at a rate of 130% of direct labor cost.
The July 1 Work in Process balance consisted of two jobs, as follows:
| Job No. | Style | Work in Process, July 1 | |||
| Job 21 | X-10 | $5,900 | |||
| Job 22 | X-20 | 15,800 | |||
| Total | $21,700 | ||||
Customer jobs completed and units sold in July were as follows:
| Job No. | Style | Completed in July | Units Sold in July | |
| No. 21 | X-10 | X | 160 | |
| No. 22 | X-20 | X | 312 | |
| No. 23 | X-50 | 0 | ||
| No. 24 | T-20 | X | 210 | |
| No. 25 | X-40 | X | 149 | |
| No. 26 | T-10 | 0 | ||
1. Determine the missing amounts associated with each letter and complete the following table. If required, round amounts to the nearest dollar. If an answer is zero, enter in "0". Enter all amounts as positive numbers.
| Job No. | Quantity | July 1 Work in Process | Direct Materials | Direct Labor | Factory Overhead | Total Cost | Unit Cost | Units Sold | Cost of Goods Sold | ||||||||
| No. 21 | $ 5,900 | $ 25,600 | $ 15,000 | $ | $ | $ | $ | ||||||||||
| No. 22 | 15,800 | 40,620 | 26,000 | ||||||||||||||
| No. 23 | 14,500 | 7,000 | |||||||||||||||
| No. 24 | 39,250 | 25,000 | |||||||||||||||
| No. 25 | 26,380 | 16,000 | |||||||||||||||
| No. 26 | 9,390 | 4,000 | |||||||||||||||
| Total | $21,700 | 155,740 | 93,000 | $ | $ | $ | |||||||||||
a. Materials Requisitions $
b. Work in Process Beginning Balance $
c. Direct Materials $
d. Direct Labor $
e. Factory overhead applied $
f. Completed jobs $
g. Cost of goods sold $
h. Indirect labor $
2. Determine the July 31 balances for each of the inventory accounts and factory overhead. Use the minus sign to indicate any credit balances.
| Materials: | $ |
| Work in Process: | $ |
| Finished Goods: | $ |
| Factory Overhead: | $ |
Feedback
1
a & c. Direct and Indirect materials are requisitioned. Direct materials are recorded in Work in Process and Indirect materials are recorded in Factory overhead.
b. The beginning work in process information is given.
d, e & h. Direct labor cost information is given. Overhead is applied based on direct labor cost.
f & g. Beginning Work in Process balances plus all current period manufacturing costs are included in the cost of completed jobs and jobs sold.
2. Insert your amounts calculated in (1) into the T accounts. Then determine the ending balances.
Learning Objective 2.
