Question

: Using Exhibit 15.15 as a guide, prepare summary journal entries to record the following transactions and events a through g for a company in its first month of operations.

1. Raw materials purchased on account, \(90,000.
2. Direct materials used in production, \)36,500. Indirect materials used in production, \(19,200.
3. Paid cash for factory payroll, \)50,000. Of this total, \(38,000 is for direct labor and \)12,000 is for indirect labor.
4. Paid cash for other actual overhead costs, \(11,475.
5. Applied overhead at the rate of 125% of direct labor cost.
6. Transferred cost of jobs completed to finished goods, \)56,800.
7. Sold jobs on account for \(82,000. The jobs had a cost of \)56,800.

Short answer

The total credit and debit side of the journal is$500,275

Step-by-step solution

Meaning of Journal Entry

Journal entry refers to the recording of monetary transactions of the business in the books of accounts in a manner in which they occur.

Preparing journal entries

Date	Particulars	Debit ($)	Credit ($)
a	Raw material Inventory	90,000
	Accounts payable		90,000
b	Work-in-process inventory	36,500
	Raw materials Inventory		36,500
	Factory overhead	19,200
	Raw material inventory		19,200
c	Factory payroll	50,000
	Cash		50,000
	Work-in-process inventory	38,000
	Factory payroll		38,000
	Factory overhead	12,000
	Factory payroll		12,000
d	Factory overhead	11,475
	Cash		11,475
e	Work-in-process inventory	47,500
	Factory overhead		47,500
f	Finished goods inventory	56,800
	Work-in-process inventory		56,800
g	Cost of goods sold.	56,800
	Finished goods inventory		56,800
	Accounts receivables	82,000
	Sales		82,000
		$500,275	$500,275

Calculation of applied overhead in point e

$$\begin{gathered} \mathbf{Overhead}\mathbf{}\mathbf{ }\mathbf{applied}\mathbf{=}\mathbf{125}\mathbf{\%}\mathbf{}\mathbf{of}\mathbf{}\mathbf{direct}\mathbf{}\mathbf{labor}\mathbf{}\mathbf{cost} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{125}\mathbf{\%}\mathbf{\times }\mathbf{\$}\mathbf{38}\mathbf{,}\mathbf{000} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{47}\mathbf{,}\mathbf{500} \end{gathered}$$