Question

Question:Lally, Inc. produces universal remote controls. Lally uses a JIT costing system. One of the company’s products has a standard direct materials cost of \(9 per unit and a standardconversion cost of \)35 per unit. During January 2018, Lally produced 500 unitsand sold 495 units on account at \(45 each. It purchased \)4,800 of direct materials onaccount and incurred actual conversion costs totaling \(14,000.

Requirements

1. Prepare summary journal entries for January.

2. The January 1, 2018, balance of the Raw and In-Process Inventory account was\)70. Use a T-account to find the January 31 balance.

3. Use a T-account to determine whether conversion costs are overallocated orunderallocated for the month. By how much? Prepare the journal entry to adjustthe Conversion Costs account.

Short answer

Ending balance for Raw and In-process inventory:$370

Over allocated cost:3,500

Step-by-step solution

Step-by-Step-SolutionStep1: Journal Entries

Date	Description	Debit	Credit
Trans 1	Raw and In-process Inventory	$4,800
	Accounts Payable		$4,800
	Being inventories purchased on account
Trans 2	Conversion Cost	$14,000
	Expenses Payable		$14,000
	Being conversion cost incurred
Trans 3	Finished Goods Inventory	$21,780
	Raw and In-process inventory		$4,500
	Conversion cost		$17,500
	Being inventory and cost transferred to finished goods
Trans 4	Accounts Receivables	$22,275
	Sales revenue		$22,275
	Being Sales made
Trans 5	Cost of goods sold	$21,780
	Finished Goods Inventory		$21,780
	Cost of goods sold recorded

Raw and In-process inventory account

Date	Particular	Amount	Date	Particular	Amount
Jan 1	Opening balance	$70	Tran 3	Finished Goods Invt	$4,500
Jan	Accounts payable	$4,800	Jan 31	Closing balance	$370

Conversion Cost account

Date	Particular	Amount	Date	Particular	Amount
Tran 2	Expenses Payable	$14,000	Jan	Finished Goods Invt	$17,500
Jan 31	Cost of goods sold	$3,500

Journal Entry

Date	Description	Debit	Credit
Jan 31	Conversion Cost	$3,500
	Cost of goods sold		$3,500
	Being cost conversion over-allocated