Question

Question:Gateway produces electronic calculators. Suppose Gateway’s standard cost per calculator is \(25 for direct materials and \)68 for conversion costs. The following data applyto August activities:

Direct materials purchased (on account) \( 8,300

Conversion costs incurred 20,500

Number of calculators produced 300 calculators

Number of calculators sold (on account, at \)105 each) 295 calculators

Requirements

1. Prepare summary journal entries for August using JIT costing, including the entryto adjust the Conversion Costs account.

2. The beginning balance of Finished Goods Inventory was $1,300. Use a T-accountto find the ending balance of Finished Goods Inventory.

Short answer

Ending balance of finished goods inventory:$1,765

Step-by-step solution

Step-by-Step-SolutionStep1: Summary journal entries for August transactions

Date	Description	Debit	Credit
Trans. 1	Raw and In-Process Inventory	$ 8,300
	Accounts Payable		$ 8,300
	Being inventories purchased on credit
Trans. 2	Conversion Costs	$20,500
	Labor and overheads cost payable		$20,500
	Being conversion cost incurred
Trans. 3	Finished goods inventory	$27,900
	Raw and In-process inventory		$7,500
	Conversion Costs		20,400
	Being completed 15,000 goods transferred to the finished inventory account at standard cost
Trans. 4	Accounts Receivables	$ 30,975
	Sales Revenue		$ 30,975
	Being goods sold on credit
Trans. 5	Cost of goods sold	$27,435
	Finished goods inventory		$27,435
	Being cost of goods sold for sold units at standard cost
Trans. 6	Cost of goods sold	$ 100
	Conversion cost		$ 100
	Being under-allocated conversion cost transferred to cost of goods sold account

Finished Goods inventory account

Date	Particular	Amount	Date	Particular	Amount
Aug 1	Opening balance	$1,300	Tran 5	Cost of goods sold	$27,435
Tran 3	Raw and In-process Inventory	$7,500	Aug 31	Closing Balance	$1,765
Tran 3	Conversion Cost	$20,400
		$29,200			$29,200