$\backslash$table$[[$Work in Process,$7,200,],[$Factory Overhead,$1,800,],[,$ Materials,,$9,000],[$Work in Process,$8,000,],[$Factory Overhead,$1,400,],[,$ Payroll,,$9,400],[$Work in Process,$3,200,],[\{$f$5$e$76949$d$-2$f$42-4$c$8$c$-80$c$8-104$f$2$a$0$cd$152\}$

$\backslash$table$[[$Factory$],[$Overhead$]],,3,200],[$Finished Goods,$18,400,],[,$ Work in Process,,$18,400]]$

SELF$-$STUDY PROBLEM $1$

Basic Cost System; Journal Entries; Financial Statements

Lone Star Manufacturing Co$.$

The post$-$closing trial balance of Lone Star Manufacturing Co$.$ at September $30$ is reproduced as follows.

Lone Star Manufacturing Co$.$

Post$-$Closing Trial Balance September $30,2011$

$\backslash$table$[[$Cash $...............,15,000,],[$Accounts Receivable $.,18,000,],[$Finished Goods,$25,000,],[$Work in Process,$4,000,],[$Materials$,8,000,],[$Building$,156,000,],[$Accumulated Depreciation$-$Building $....,,23,400],[$Factory Equipment $.,108,000,],[$Accumulated Depreciation$-$Factory Equipment,,$54,000],[$Office Equipment,$12,000,],[$Accumulated Depreciation$-$Office Equipment,,$2,000],[$Accounts Payable,,$30,000],[$Capital Stock $......,,175,000],[$Retained Earnings,,$61,600],[,346,000,346,000]]$

Chapter $1-$ Introduction to Cost Accounting

$41$

During the month of October, the following transactions took place:

a$.$ Raw materials at a cost of $$50,000$ and general factory supplies costing $$8,000$ were purchased on account. $($Materials and supplies are recorded in the materials account.$)$

b$.$ Raw materials to be used in production costing $$41,000$ and miscellaneous factory supplies costing $$5,500$ were issued.

c$.$ Wages and salaries incurred and paid for the month were as follows: factory wages $($including $$2,500$ indirect labor$),$ $$34,000,$ and selling and administrative salaries, $$5,000.($Ignore payroll withholdings and deductions.$)$

d$.$ Distributed the payroll in $($c$).$

e$.$ Depreciation was recorded for the month at an annual rate of $5\%$ on the building and $20\%$ on the factory equipment and office equipment. The sales and administrative staff uses approximately one$-$fifth of the building for its offices.

f$.$ During the month, various other expenses totaling $$5,200$ were incurred on account. The company has determined that one$-$fourth of this amount is allocable to the office function.

g$.$ Total factory overhead costs were transferred to Work in Process.

h$.$ During the month, goods with a total cost of $$79,000$ were completed and transferred to the finished goods storeroom.

i$.$ Sales for the month totaled $$128,000$ for goods costing $$87,000$ to manufacture. $($Assume that all sales were made on account.$)$

j$.$ Accounts receivable in the amount of $$105,000$ were collected.

k$.$ Accounts payable totaling $$55,000$ were paid.

Required:

Prepare journal entries to record the transactions.

Set up T$-$accounts for all accounts listed in the September $30,2011,$ Post$-$Closing Trial Balance and for Cost of Goods Sold, Factory Overhead, Selling and Administrative Expenses, Sales, and Wages Payable. Post the beginning trial balance and the journal entries prepared in Part $1$ to the accounts and calculate the balances in the accounts on October $31.$

Prepare a statement of cost of goods manufactured, an income statement, and a balance sheet.

SOLUTION TO SELF$-$STUDY PROBLEM

Suggestions:

Read the entire problem thoroughly, keeping in mind what you are required to do:

Journalize the transactions.

Post the beginning trial balance and the journal entries to the T$-$accounts that you set up and calculate the ending balance for each account.

Using the ending account balances, prepare a cost of goods manufactured statement, an income statement, and a balance sheet.