Journal entries, T-accounts and source documents. Production Com

Journal entries, T-accounts and source documents. Production Company produces gadgets for the coveted small appliance market. The following data reflects activity for the year 2008.

Production Co. uses a normal cost system and allocates overhead to work in process at a rate of $2.50 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials.

1. Prepare journal entries to record the transactions for 2008 including an entry to close out over- or under allocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be referenced as backup for the entry.

2. Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing—Overhead Control Account, and the Manufacturing Overhead Allocated Account.

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