Samson Company Case Sampson Company uses a job order cost system with overhead applied to products based on direct labor hours. Based on previous history, the company estimated its total overhead for the coming year 

(2014) to be $720,000 and its total direct labor hours to be 24,000. On January 1, 2014, the general ledger of Sampson Company revealed that it had one job in process (Job 102) for which it had incurred a total cost of $15,000. Job 101 had been finished the previous month for a total cost of $30,000 but was not yet sold. The company had a contract for Job 103 but had not started working on it yet.

 

SAMPSON COMPANY General Ledger

Accounts Raw Materials Inventory 1/1 Balance 10,000

Manufacturing Overhead

Work in Process Inventory (WIP) 1/1 Balance 15,000

Finished Goods Inventory 1/1 Balance 30,000

Individual Job Cost Sheets (subsidiary ledgers to WIP) Job 102 Job 103 Beg. Balance 15,000 1Direct Materials 1Direct Labor 1 Applied OH Total Mfg. Cost

Cost of Goods Sold

Sales Revenue

Selling, General, and Administrative Expenses

Cash and Other Assets 1/1 Balance 100,000

Payables and Other Liabilities 85,000 1/1 Balance

Stockholders' Equity 70,000 1/1 Balance

During January, the company had the following transactions:

(a) Purchased $10,000 worth of raw materials on account.

(b) Issued the following materials into production: Item Cost Explanation Direct materials $7,000 Job 102, $2,000; Job 103, $5,000 Indirect materials 2,000 Used on both jobs Total materials issued $9,000

 (c) Recorded salaries and wages payable as follows: Item Cost Explanation Direct labor $10,000 Job 102, $6,000; Job 103, $4,000 Indirect labor 4,000 For factory supervision Salaries 5,000 For administrative staff Total payroll cost 

$19,000

 

(d) Applied overhead to jobs based on the number of direct labor hours required: Job Number Direct Labor Hours Job 102 300 hours Job 103 200 hours Total 500 hours

(e) Recorded the following actual manufacturing costs: Item Cost Explanation Rent $ 6,000 Paid factory rent in cash Depreciation 5,000 Factory equipment Insurance 3,000 Had one month of factory insurance policy expire Utilities 2,000 Received factory utility bill but did not pay it Total cost $16,000

(f) Recorded the following general and administrative costs: Item Cost Explanation Advertising $2,000 Advertising paid in cash Depreciation 3,000 Office equipment Other expenses 1,000 Micellaneous expenses incurred but not 

paid Total cost $6,000 

 

(g) Sold Job 101, which is recorded in Finished Goods Inventory at a cost of $30,000, for $55,000.

(h) Completed Job 102 but did not sell it; Job 103 is still in process at year-end.

Compute the total cost of Jobs 102 and 103 at the end of the period. Where would the cost of each of these jobs appear on the year-end balance sheet?

Prepare journal entries to record the January transactions and post the entries to the general ledger T-accounts given earlier in the problem.