Q1. Durham Company’s trial balance as of January 1, the beginning of the current year, is given below:

Direct labor . . . . . . . . . . . . . . . . $40,000

Indirect labor . . . . . . . . . . . . . . . $18,000

Sales commissions . . . . . . . . . . $10,400

Administrative salaries . . . . . . . $25,000

Cash. . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000

Accounts Receivable . . . . . . . . . . . . 13,000

Raw Materials . . . . . . . . . . . . . . . . . 7,000

Work in Process . . . . . . . . . . . . . . . . 18,000

Finished Goods . . . . . . . . . . . . . . . . 20,000

Prepaid Insurance . . . . . . . . . . . . . . 4,000

Plant and Equipment . . . . . . . . . . . . 230,000

Accumulated Depreciation . . . . . ……………….. . $ 42,000

Accounts Payable . . . . . . . . . . . . ………………. . 30,000

Capital Stock . . . . . . . . . . . . . . . …………….. …. . 150,000

Retained Earnings . . . . . . . . . . . . . ………………... 78,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 $300,000

Durham Company uses a job-order costing system. During the year, the following transactions took place:

a. Raw materials purchased on account, $45,000.

b. Raw materials requisitioned for use in production, $40,000 (80% direct and 20% indirect).

c. Factory utility costs incurred $14,600.

d. Depreciation recorded on plant and equipment, $28,000. Three-fourths of the depreciation relates

to factory equipment, and the remainder relates to selling and administrative equipment.

e. Costs for salaries and wages were incurred as follows

Direct labor . . . . . . . . . . . . . . . . $40,000

Indirect labor . . . . . . . . . . . . . . . $18,000

Sales commissions . . . . . . . . . . $10,400

Administrative salaries . . . . . . . $25,000

f. Prepaid insurance expired during the year, $3,000 (80% relates to factory operations, and 20%

relates to selling and administrative activities).

g. Miscellaneous selling and administrative expenses incurred, $18,000.

h. Manufacturing overhead was applied to production. The company applies overhead on the basis

of 150% of direct labor cost.

i. Goods that cost $130,000 to manufacture according to their job cost sheets were transferred to

the finished goods warehouse.

j. Goods that had cost $120,000 to manufacture according to their job cost sheets were sold on

account for $200,000.

k. Collections from customers during the year totaled $197,000.

l. Payments to suppliers on account during the year, $100,000; and payments to employees for

salaries and wages, $90,000.

Required:

1. Prepare a T-account for each account in the company’s trial balance, and enter the opening

Balances shown above.

2. Record the transactions above directly into the T-accounts. Prepare new T-accounts as needed.

Key your entries to the letters (a) through (l) above. Find the ending balance in each account.

3. Is manufacturing overhead under applied or over applied for the year? Make an entry in the

T-accounts to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured;

all of the information needed for the income statement is available in the T-accounts you

have prepared.)

Q2. The PVC Company manufactures a high-quality plastic pipe in two departments, Cooking and Molding.

Materials are introduced at various points during work in the Cooking Department. After the cooking is completed, the materials are transferred into the Molding Department, in which pipe is formed.

Selected data relating to the Cooking Department during May are given below:

Production data:

Pounds in process, May 1: materials 100%

complete, conversion 90% complete . . . . . . . . . . . . . . . . . . . 70,000

Pounds started into production during May . . . . . . . . . . . . . . . . 350,000

Pounds completed and transferred to Molding . . . . . . . . . . . . . ?

Pounds in process, May 31: materials 75% complete,

conversion 25% complete . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000

Cost data:

Work in process inventory, May 1:

Materials cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $86,000

Conversion cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,000

Cost added during May:

Materials cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $447,000

Conversion cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $198,000

By using weighted-average method and FIFO method.

Required:

1. Compute the equivalent units of production.

2. Compute the costs per equivalent unit for May.

3. Determine the cost of ending work in process inventory and of the units transferred to the Molding Department.

Answer rating: 100% (QA)

Journal entries for recording transactions during the year a 45000 Raw Materials AcDr To Accounts Pa... View the full answer