Chapter 15: Q8E (page 698)
Use information in Exercise 15-7 to prepare journal entries for the following events for the month of May.
Raw materials are debited with$210,000
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How would a hospital apply job order costing? Explain.
Use information in Exercise 15-7 to prepare journal entries for the following events for the month of May.
A company applies overhead at a rate of 150% of direct labor cost. Actual overhead cost for the current period is \(950,000, and direct labor cost is \)600,000. Prepare the journal entry to close over- or underapplied overhead to Cost of Goods Sold.
Google applies overhead to product costs. What account(s) is(are) used to eliminate overapplied or underapplied overhead from the Factory Overhead account, assuming the amount is not material?
Cavallo Mfg.’s computer system generated the following trial balance on December 31, 2017. The company’s manager knows that the trial balance is wrong because it does not show any balance for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition, the accrued factory payroll (Factory Wages Payable) has not been recorded.
Debit Credit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 64,000
Accounts receivable . . . . . . . . . . . . . . . . . . 42,000
Raw materials inventory . . . . . . . . . . . . . . . 26,000
Work in process inventory . . . . . . . . . . . . . . 0
Finished goods inventory . . . . . . . . . . . . . . 9,000
Prepaid rent . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Accounts payable . . . . . . . . . . . . . . . . . . . . \) 10,500
Notes payable . . . . . . . . . . . . . . . . . . . . . . . 13,500
Common stock . . . . . . . . . . . . . . . . . . . . . . . 30,000
Retained earnings . . . . . . . . . . . . . . . . . . . . 87,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . 105,000
Factory overhead . . . . . . . . . . . . . . . . . . . . 27,000
Operating expenses . . . . . . . . . . . . . . . . . . 45,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(321,000 \)321,000
After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.
Materials requisition 94-231: \(4,600 direct materials to Job 603
Materials requisition 94-232: \)7,600 direct materials to Job 604
Materials requisition 94-233: \(2,100 indirect materials
Labor time ticket 765: \)5,000 direct labor to Job 603
Labor time ticket 766: \(8,000 direct labor to Job 604
Labor time ticket 777: \)3,000 indirect labor
Jobs 603 and 604 are the only units in process at year-end. The predetermined overhead rate is 200% of direct labor cost.
Required
1. Use information on the six source documents to prepare journal entries to assign the following costs.
a. Direct materials costs to Work in Process Inventory.
b. Direct labor costs to Work in Process Inventory.
c. Overhead costs to Work in Process Inventory.
d. Indirect materials costs to the Factory Overhead account.
e. Indirect labor costs to the Factory Overhead account.
2. Determine the revised balance of the Factory Overhead account after making the entries in part 1. Determine whether there is any under- or overapplied overhead for the year. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold, assuming the amount is not material.
3. Prepare a revised trial balance.
4. Prepare an income statement for 2017 and a balance sheet as of December 31, 2017.
Analysis Component
5. Assume that the $2,100 on materials requisition 94-233 should have been direct materials charged to Job 604. Without providing specific calculations, describe the impact of this error on the income statement for 2017 and the balance sheet at December 31, 2017.
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