Question

Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of \(6,000, direct labor of \)2,800, and applied overhead of \(2,240. Custom Cabinetry applies overhead at the rate of 80% of direct labor cost. During July, Job 120 is sold (on account) for \)22,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.

July Product Costs	Job 120	Job 121	Job 122	Total
Direct materials	\(1,000	\)6,000	\(2,500	\)9,500
Direct labor	2,200	3,700	2,100	8,000
Overhead applied	?	?	?	?

1. Prepare journal entries for the following transactions and events a through e in July.

1. Direct materials used in production.
2. Direct labor used in production.
3. Overhead applied.
4. The sale of Job 120
5. Cost of goods sold for Job 120.

Short answer

1. Total debit and credit side of the journal is $61,900.

Step-by-step solution

Meaning of Work-in-Process

Work in progress refers to items that have been partially completed but are still in the manufacturing process. These objects are in-between locales or separate workstations and are primarily undergoing a specific procedure in the manufacturing cycle.

Step 2:Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
a	Work in process Inventory	9,500
	Raw material		9,500
b	Work-in-process inventory	8,000
	Factory payroll		8,000
c	Work-in-process inventory $\left(\$8,000\times 80\%\right)$	6,400
	Factory overhead		6,400
d	Account receivables	22,000
	Sales		22,000
e	Cost of goods sold (refer step 3)	16,000
	Finished goods inventory		16,000
		$61,900	$61,900

Step 3:Calculation of cost of goods sold

	Job 120	Job 120
	For June month	For July month
Direct material	$6,000	$1,000
Direct labors	2,800	2,200
Overhead	2,240	$\left(\$2,200\times 80\%\right)$1,760
Total cost	$11,040	$4,960

role="math" localid="1663196366958" $$\begin{gathered} \mathbf{Total}\mathbf{ }\mathbf{cost}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{goods}\mathbf{ }\mathbf{sold}\mathbf{=}\mathbf{\$}\mathbf{11}\mathbf{,}\mathbf{040}\mathbf{+}\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{960} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{16}\mathbf{,}\mathbf{000} \end{gathered}$$