Digital Controls makes electronic thermostats for homes and offices. The Regina Division makes one product, Autotherm, which has a standard cost of $36, consisting of $20 of materials and $16 of conversion costs. In January, actual purchases of materials totalled $45,000, labour payroll costs were $10,000, and manufacturing overhead was $20,000. Completed output was 2,000 units.
The Regina Division uses a back flush costing system that records costs in materials inventory and conversion costs accounts and applies costs to products at the time production is completed. There were no finished goods inventories on January 1, and 20 units on January 31.

1. Prepare journal entries (without explanations) to record January’s costs for the Regina Division. Include the purchase of materials, incurrence of labour and manufacturing overhead costs, application of product costs, and recognition of cost of goods sold.

2. Suppose January’s actual manufacturing overhead costs had been $24,000 instead of $20,000. Prepare the journal entry to recognize under applied conversion costs at the end of January.