Accounting Chapter 2 Homework Post The Entries Work Process Inventory Reconcile

E2-1 Prepare entries for factory labor

The gross earnings of the factory workers for Larkin Company during the month of January are $76,000.

The employer’s payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer

on this payroll are $6,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and

15% is attributable to indirect labor.

Instructions

(a)

Prepare the entry to record the factory labor costs for the month of January

(b) Prepare the entry to assign the factory labor to production.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a)

Prepare the entry to record the factory labor costs for the month of January

Value Value

Value

(b) Prepare the entry to assign the factory labor to production.

?

?Value

After you have completed E2-1, consider the following additional question.

1. Assume that factory wages changed and employer’s payroll taxes changed to $78,000 and $9,360 respectively.

Also assume that 80% of total labor costs is related to direct labor. Revise the journal entries to reflect these

changes.

Account

Factory labor

Manufacturing Overhead

E2-1 Solution

(a) Prepare the entry to record the factory labor costs for the month of January

90,000 76,000

(b) Prepare the entry to assign the factory labor to production.

76,500

Factory labor

Work in Process Inventory

Factory Wages Payable

Employer Payroll Taxes Payable

Employer Fringe Benefits Payable

Factory labor

Manufacturing Overhead

E2-1 Solution to additional question

1. Assume that factory wages changed and employer‘s payroll taxes changed to $78,000 and $9,360 respectively.

Also assume that 80% of total labor costs is related to direct labor. Revise the journal entries to reflect these

changes.

(a) Prepare the entry to record the factory labor costs for the month of January

93,360 78,000

(b) Prepare the entry to assign the factory labor to production.

74,688

Factory labor

Work in Process Inventory

Factory Wages Payable

Employer Payroll Taxes Payable

Employer Fringe Benefits Payable

E2-5 Compute the manufacturing overhead rate and under- or overapplied overhead

Ikerd Company applies overhead to jobs on the basis of machine hours used. Overhead costs are expected to total

$300,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs

are incurred and 130,000 hours are used.

Instructions

(a) Compute the manufacturing overhead rate for the year.

(b) What is the amount of under-or overapplied overhead at December 31?

(c ) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a) Compute the manufacturing overhead rate for the year.

Estimated total overhead cost Value

Estimated machine hours Value

Overhead rate ?

(b) What is the amount of under-or overapplied overhead at December 31?

Value

?

Value

?

(c ) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Value

After you have completed E2-5, consider the following additional question.

1. Assume that the estimated total overhead for the year changed to $350,000. Determine

the impact on this change on the overhead rate, the amount of manufacturing overhead

over(under) applied. Revise the journal to dispose of over (under) applied overhead.

Account

Actual machine hours used

Manufacturing overhead applied

Manufacturing overhead incurred

Manufacturing overhead over (under applied)

Manufacturing overhead applied

Manufacturing overhead incurred

Manufacturing overhead over (underapplied)

Manufacturing Overhead

Cost of Goods Sold

E2-5 Solution

(a) Compute the manufacturing overhead rate for the year.

Estimated total overhead cost $300,000

(b) What is the amount of under-or overapplied overhead at December 31?

130,000

(c ) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Actual machine hours used

Manufacturing overhead incurred

Manufacturing overhead over (under applied)

Cost of Goods Sold

Manufacturing Overhead

E2-5 Solution to additional question

1. Assume that the estimated total overhead for the year changed to $350,000. Determine

the impact on this change on the overhead rate, the amount of manufacturing overhead

over (under) applied. Revise the journal to dispose of over (under) applied overhead.

(a) Compute the manufacturing overhead rate for the year.

(b) What is the amount of under-or overapplied overhead at December 31?

130,000

364,000

(c ) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Actual machine hours used

Manufacturing overhead applied

E2-9 Prepare a cost of goods manufactured schedule and partial financial statements

At May 31, 2017, the accounts of Lopez Company show the following.

1. May 1 inventories – finished goods $12,600, work in process $14,700 and raw

materials $8,200.

2. May 31 inventories – finished goods $9,500, work in process, $15,900, and raw

materials $7,100.

3. Debit postings to work in process were direct materials, $62,400, direct labor $50,000,

and manufacturing overhead applied $40,000.

4. Sales revenue totaled $215,000.

Instructions

(a) Prepare a condensed cost of goods manufactured schedule.

(b) Prepare an income statement for May through gross profit.

(c ) Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2017.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a) Prepare a condensed cost of goods manufactured schedule.

Work in process, May 1 Value

Direct materials used Value

Direct labor Value

Manufacturing overhead applied Value

Total manufacturing costs ?

Total cost of work in process ?

Less: Work in process, May 31 Value

Cost of goods manufactured ?

(b) Prepare an income statement for May through gross profit.

Sales revenue Value

Cost of goods sold

Finished goods, May 1 Value

Cost of goods manufactured ?

Cost of goods available for sale ?

Less: Finished goods, May 31 Value

Cost of goods sold ?

Gross profit ?

(c ) Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2017.

Current Assets:

Finished goods inventory Value

Work in process inventory Value

LOPEZ COMPANY

(Partial) Balance Sheet

May 31, 2017

LOPEZ COMPANY

Cost of Goods Manufactured Schedule

For the Month Ended May 31, 2017

LOPEZ COMPANY

(Partial) Income Statement

For the Month Ended May 31, 2017

Raw materials inventory Value ?

After you have completed E2-9, consider the following additional question.

1. Assume that the total costs for direct materials, direct labor and overhead

changed to $81,400, 63,600 and $45,000 respectively. Show the impact of

these changes on the cost of goods manufactured schedule, income statement

and balance sheet.

E2-9 Solution

(a) Prepare a condensed cost of goods manufactured schedule.

Work in process, May 1 $14,700

Direct materials used $62,400

(b) Prepare an income statement for May through gross profit.

Sales revenue $215,000

Cost of goods sold

(c ) Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2017.

Current Assets:

Finished goods inventory $9,500

LOPEZ COMPANY

(Partial) Balance Sheet

May 31, 2017

LOPEZ COMPANY

Cost of Goods Manufactured Schedule

For the Month Ended May 31, 2017

LOPEZ COMPANY

(Partial) Income Statement

For the Month Ended May 31, 2017

E2-9 Solution to additional question

1. Assume that the total costs for direct materials, direct labor and overhead

changed to $81,400, 63,600 and $45,000 respectively. Show the impact of

these changes on the cost of goods manufactured schedule, income statement

and balance sheet.

(a) Prepare a condensed cost of goods manufactured schedule.

Work in process, May 1 $14,700

Direct materials used $81,400

(b) Prepare an income statement for May through gross profit.

Sales revenue $215,000

Cost of goods sold

Finished goods, May 1 $12,600

(c ) Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2017.

Current Assets:

Finished goods inventory $9,500

LOPEZ COMPANY

(Partial) Balance Sheet

May 31, 2017

LOPEZ COMPANY

Cost of Goods Manufactured Schedule

For the Month Ended May 31, 2017

LOPEZ COMPANY

(Partial) Income Statement

For the Month Ended May 31, 2017

P2-3A Prepare entries for a job order cost system and cost of goods manufactured schedule

Case Inc. is a construction company specializing in custom patios. The patios are constructed of

concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2017,

the general ledger for Case Inc. contains the following data.

Raw Materials Inventory $4,200 Manufacturing Overhead Applied $32,640

Work in Process Inventory $5,540 Manufacturing Overhead Incurred $31,650

Subsidiary data for Work in Process Inventory on June 1 are as follows.

Cost Element Rodgers Stevens Linton

Direct materials $600 $800 $900

Direct labor 320 540 580

Manufacturing overhead 400 675 725

$1,320 $2,015 $2,205

During June, raw materials purchased on account were $4,900, and all wages were paid. Additional

overhead costs consisted of depreciation on equipment $900 and miscellaneous costs of $400 incurred

on account.

A summary of materials requisition slips and time tickets for June show the following.

Custo

mer

Job

Materials

Requisition

slips

Time tickets

Rodgers 800$ $850

Koss 2,000 800

Stevens 500 360

Linton 1,300 1,200

Rodgers 300 390

4,900 3,600

General use 1,500 1,200

6,400$ $4,800

Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for

customers Rodgers, Stevens, and Linton were completed during June and sold for a total of $18,900.

Each customer paid in full.

Instructions

(a) Journalize the June transactions: (1) for purchase of raw materials, factory labor costs incurred,

and manufacturing overhead costs incurred; (2) assignment of direct materials, labor, and overhead to

production; and (3) completion of jobs and sale of goods.

(b) Post the entries to Work in Process Inventory.

(c ) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.

(d) Prepare a cost of goods manufactured schedule for June.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a)(1)

Journalize the June transactions for purchase of raw materials, factory labor costs incurred,

and manufacturing overhead costs incurred

Value

Account

Customer Job

Job Cost Sheets

Account

Value

(a)(2) Journalize the June transactions for assignment of direct materials, labor, and overhead to production

Value

(a)(3) Journalize the June transactions for completion of jobs and sale of goods.

Value

(b) Post the entries to Work in Process Inventory.

6/1 Balance Value June Completed work Value

Direct Materials Value

Direct labor Value

Overhead applied Value

6/30 Balance ?

(c ) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.

6/30 balance in Work in Process Inventory Value

Unfinished Job (Koss)

Direct materials Value

Direct labor Value

Manufacturing overhead Value

?

(d) Prepare a cost of goods manufactured schedule for June.

Work in process, June 1 Value

Direct materials used Value

Direct labor Value

Manufacturing overhead applied Value

Cost of Goods Manufactured Schedule

For the Month Ended June 30, 2017

Account

Work in Process Inventory

CASE INC.

Account

Total manufacturing costs ?

Total cost of work in process ?

Less: Work in process, June 30 Value

Cost of goods manufactured ?

After you have completed P2-3A, consider the following additional question.

1.

Assume that indirect labor and raw materials purchases changed to $1,400 and $6,800 respectively.

Also assume that overhead is applied at the rate of $1.50 per dollar of direct labor. The three

completed jobs were sold for $22,000 cash. Revise the journal entries to reflect these changes.

Work in Process Inventory

Manufacturing Overhead

Factory Labor

Work in Process Inventory ($3,600 x 1.25)

Manufacturing Overhead

Sales Revenue

Cost of Goods Sold

Finished Goods Inventory

P2-3A Solution

(a)(1) Journalize the June transactions for purchase of raw materials, factory labor costs incurred,

and manufacturing overhead costs incurred

4,900 4,900

(a)(2) Journalize the June transactions for assignment of direct materials, labor, and overhead to production

4,900

1,500 6,400

(a)(3) Journalize the June transactions for completion of jobs and sale of goods.

14,740 14,740

Direct Direct Manufacturing Total

Job Materials labor Overhead Costs

Rodgers $1,700 $1,560 $1,950 $5,210

(b) Post the entries to Work in Process Inventory.

Work in Process Inventory

Manufacturing Overhead

Raw Materials Inventory

Finished Goods Inventory

Work in Process Inventory

Raw Materials Inventory

Accounts Payable

Accumulated Depreciation – Equipment

Factory labor

Manufacturing Overhead

Direct labor 3,600

(c ) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.

Work in Process Inventory $3,800

(d) Prepare a cost of goods manufactured schedule for June.

Work in process, June 1 $5,540

Direct materials used $4,900

For the Month Ended June 30, 2017

CASE INC.

Cost of Goods Manufactured Schedule

P2-3A Solution to additional question

Factory Labor

Work in Process Inventory (3,600 x 1.5)

Manufacturing Overhead

Work in Process Inventory

1. Assume that indirect labor and raw materials purchases changed to $1,400 and $6,800 respectively.

Also assume that overhead is applied at the rate of $1.50 per dollar of direct labor. The three

completed jobs were sold for $22,000 cash. Revise the journal entries to reflect these changes.

(a)(1) Journalize the June transactions for purchase of raw materials, factory labor costs incurred,

and manufacturing overhead costs incurred

6,800

(a)(2) Journalize the June transactions for assignment of direct materials, labor, and overhead to production

4,900

1,500

6,400

(a)(3) Journalize the June transactions for completion of jobs and sale of goods.

Cost of Goods Sold

Work in Process Inventory

Manufacturing Overhead

Raw Materials Inventory

Accounts Payable

Raw Materials Inventory

Accounts Payable

Factory labor

P2-5A Analyze manufacturing accounts and determine missing amounts

Phillips Corporation’s fiscal year ends on November 30. The following accounts are found in its job

order cost accounting system for the first month of the new fiscal year.

Dec. 1 Beginning balance (a) Dec. 31 Requisitions $16,850

31 Purchases 17,225

Dec.31 Ending balance 7,975

Dec. 1 Beginning balance (b) Dec. 31 Jobs completed (f)

31 Direct materials (c)

31 Direct labor 8,400

31 Overhead (d)

Dec. 31 Ending balance (e)

Dec. 1 Beginning balance (g) Dec. 31 Cost of goods sold (i)

Dec. 31 Jobs completed (h)

Dec. 31 Ending balance (j)

Dec. 31 Factory wages 12,025 Dec. 31 Wages assigned (k)

Dec. 31 Indirect materials 2,900 Dec. 31 Overhead applied (m)

31 Indirect labor (l)

31 Other overhead 1,245

Other data:

1. On December 1, two jobs were in process: Job No. 154 and Job No.155. These jobs had combined direct

materials costs of $9,750 and direct labor costs of $15,000. Overhead was applied at a rate that was 75%

of direct labor cost.

2. During December, Job Nos. 156, 157 and 158 were started. On December 31, Job No. 158 was unfinished.

This job had charges for direct materials $3,800 and direct labor $4,800 plus manufacturing overhead. All

jobs, except for Job No. 158, were completed in December.

3. On December 1, Job No. 153 was in the finished goods warehouse. It had a total cost of $5,000. On

December 31, Job No. 157 was the only job finished that was not sold. It had a cost of $4,000.

4. Manufacturing overhead was $1,470 underapplied in December.

Instructions

List the items (a) through (m) and indicate the amount pertaining to each letter.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a) Beginning balance, raw materials

Total requisitions Value

Ending balance, raw materials Value

Less: purchases Value

Beginning balance, raw materials ?

(b) Beginning work in process (Job 154 & Job 155)

Direct materials Value

Direct labor Value

Overhead applied ?

?

(c ) Direct materials

Requisitions of raw materials Value

Raw Materials Inventory

Work in Process Inventory

Finished Goods Inventory

Factory Labor

Manufacturing Overhead

Less: indirect materials Value

Direct materials ?

(d) Overhead applied

Direct labor Value

Overhead applied ?

(75% of DL)

(e) Ending work in process (Job No. 158)

Direct materials Value

Direct labor Value

Overhead applied ?

?

(f) Completed Jobs (Jobs 154 -157)

Beginning balance, work in process Value

Direct materials Value

Direct labor Value

Overhead applied Value

Less: ending work in process Value

Jobs completed ?

(g) Beginning balance, finished goods (Job 153) Value

(h) Jobs completed Value

(i) Cost of goods sold

Beginning finished goods Value

Jobs completed Value

Less: ending finished goods Value

Cost of goods sold ?

(j) Ending finished goods (Job 157) Value

(k) Wages assigned to work in process Value

(l) Indirect labor

Factory wages Value

Less: direct labor Value

Indirect labor Value

(m) Overhead applied

Direct labor Value

Overhead applied ?

When you have completed P2-5A, consider the following additional question.

1. Assume that requisitions changed to $17,600. Show the impact of this

change on the items listed.

P2-5A Solution

(a) Beginning balance, raw materials

Total requisitions $16,850

(b) Beginning work in process (Job 154 & Job 155)

Direct materials $9,750

(c ) Direct materials

Requisitions of raw materials $16,850

Less: indirect materials 2,900

(d) Overhead applied

(e) Ending work in process (Job No. 158)

Direct materials $3,800

Direct labor 4,800

(f) Completed Jobs (Jobs 156 & 157)

Beginning balance, work in process $36,000

Direct materials 13,950

(h) Jobs completed $52,450 See (f) above

(j) Ending finished goods (Job 157) $4,000

P2-5A Solution to additional question

1. Assume that requisitions changed to $17,600. Show the impact of this

change on the items listed.

(a) Beginning balance, raw materials

(b) Beginning work in process (Job 154 & Job 155)

Direct materials $9,750

Direct labor 15,000

(d) Overhead applied

Direct labor $8,400

Overhead applied $6,300

(e) Ending work in process (Job No. 158)

Direct materials $3,800

Direct labor 4,800

(f) Completed Jobs (Jobs 156 & 157)

Beginning balance, work in process $36,000

(g) Beginning balance, finished goods (Job 153) $5,000

(i)

Cost of goods sold

Beginning finished goods $5,000

(j) Ending finished goods (Job 157) $4,000

(k) Wages assigned to work in process $12,025 (Equal to factory labor incurred.)