Question

exercise 3-2 (static) prepare t-accounts lo3-2, lo3-4

jurvin enterprises is a manufacturing company with no beginning inventories. a subset of the transactions it recorded during a recent month is shown below:

a. purchased $94,000 in raw materials for cash.
b. $89,000 in raw materials were used in production. of this amount, $78,000 was direct materials and the remainder was indirect materials.
c. paid employees $132,000 cash. of this amount, $112,000 was direct labor and the remainder was indirect labor.
d. paid $143,000 for additional manufacturing overhead costs.
e. applied manufacturing overhead of $152,000 to production using the companys predetermined overhead rate.
f. all of the jobs in process at the end of the month were completed.
g. all of the completed jobs were shipped to customers.
h. any underapplied or overapplied overhead was closed to cost of goods sold.

required:

1. post the above transactions to t-accounts.
2. calculate the adjusted cost of goods sold for the period.

Explanation:

Analyze transactions and T-accounts

Using the Manufacturing Overhead T-Account and Work in Process T-Account knowledge points:

• Beginning balances are all \(0\) because there are no beginning inventories.
• Transaction a: Purchased raw materials for cash, \(\$94,000\).
• Debit Raw Materials \(\$94,000\), Credit Cash \(\$94,000\).
• Transaction b: Raw materials used in production, \(\$89,000\) (\(\$78,000\) direct, \(\$11,000\) indirect).
• Debit Work in Process \(\$78,000\) (direct), Debit Manufacturing Overhead \(\$11,000\) (indirect), Credit Raw Materials \(\$89,000\).
• Transaction c: Paid employees cash, \(\$132,000\) (\(\$112,000\) direct labor, \(\$20,000\) indirect labor).
• Debit Work in Process \(\$112,000\) (direct), Debit Manufacturing Overhead \(\$20,000\) (indirect), Credit Cash \(\$132,000\).
• Transaction d: Paid additional manufacturing overhead costs, \(\$143,000\).
• Debit Manufacturing Overhead \(\$143,000\), Credit Cash \(\$143,000\).
• Transaction e: Applied manufacturing overhead, \(\$152,000\).
• Debit Work in Process \(\$152,000\), Credit Manufacturing Overhead \(\$152,000\).

Determine Work in Process and Finished Goods transfers

Using the Work in Process T-Account knowledge point:

• Total debits to Work in Process:

$$ \text{Direct Materials} + \text{Direct Labor} + \text{Applied Overhead} = \$78,000 + \$112,000 + \$152,000 = \$342,000 $$

• Transaction f: All jobs in process were completed.
• Transfer from Work in Process to Finished Goods: Debit Finished Goods \(\$342,000\), Credit Work in Process \(\$342,000\).
• Transaction g: All completed jobs were shipped to customers.
• Transfer from Finished Goods to Cost of Goods Sold: Debit Cost of Goods Sold \(\$342,000\), Credit Finished Goods \(\$342,000\).

Calculate underapplied or overapplied overhead

Using the Manufacturing Overhead T-Account knowledge point:

• Actual Manufacturing Overhead (Debits):

$$ \text{Indirect Materials} + \text{Indirect Labor} + \text{Other Overhead} = \$11,000 + \$20,000 + \$143,000 = \$174,000 $$

• Applied Manufacturing Overhead (Credits): \(\$152,000\).
• Overhead Balance:

$$ \$174,000 - \$152,000 = \$22,000 \quad (\text{Debit balance, meaning underapplied}) $$

Calculate adjusted Cost of Goods Sold

Using the Adjusted Cost of Goods Sold knowledge point:

• Transaction h: Close underapplied overhead to Cost of Goods Sold.
• Debit Cost of Goods Sold \(\$22,000\), Credit Manufacturing Overhead \(\$22,000\).
• Adjusted Cost of Goods Sold:

$$ \text{Unadjusted COGS} + \text{Underapplied Overhead} = \$342,000 + \$22,000 = \$364,000 $$

Answer:

Question 1

The completed T-accounts are posted as follows:

• Cash
• Beginning balance: \(0\)
• Credits: \(\$94,000\) (a), \(\$132,000\) (c), \(\$143,000\) (d)
• Ending balance (Credit): \(\$369,000\)

• Raw Materials
• Beginning balance: \(0\)
• Debits: \(\$94,000\) (a)
• Credits: \(\$89,000\) (b)
• Ending balance (Debit): \(\$5,000\)

• Work in Process
• Beginning balance: \(0\)
• Debits: \(\$78,000\) (b), \(\$112,000\) (c), \(\$152,000\) (e)
• Credits: \(\$342,000\) (f)
• Ending balance: \(0\)

• Finished Goods
• Beginning balance: \(0\)
• Debits: \(\$342,000\) (f)
• Credits: \(\$342,000\) (g)
• Ending balance: \(0\)

• Manufacturing Overhead
• Debits: \(\$11,000\) (b), \(\$20,000\) (c), \(\$143,000\) (d)
• Credits: \(\$152,000\) (e), \(\$22,000\) (h)
• Ending balance: \(0\)

• Cost of Goods Sold
• Beginning balance: \(0\)
• Debits: \(\$342,000\) (g), \(\$22,000\) (h)
• Ending balance (Debit): \(\$364,000\)

Question 2

The adjusted cost of goods sold for the period is \(\$364,000\).