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 T-account balances

Using the T-Account Analysis knowledge point, we examine the ending balances of the relevant accounts from the completed T-accounts shown in the image.

• Manufacturing Overhead:
• Debit side (Actual overhead incurred):
• Indirect materials (from transaction b): \(11,000\)
• Indirect labor (from transaction c): \(20,000\)
• Additional overhead (from transaction d): \(143,000\)
• Total actual overhead = \(11,000 + 20,000 + 143,000 = 174,000\)
• Credit side (Applied overhead):
• Applied overhead (from transaction e): \(152,000\)
• Ending balance (Debit):
• \(174,000 - 152,000 = 22,000\) (Debit balance indicates underapplied overhead)

Determine underapplied overhead

Using the Manufacturing Overhead T-Account knowledge point, we calculate the underapplied overhead amount.

• Actual Manufacturing Overhead = \(174,000\)
• Applied Manufacturing Overhead = \(152,000\)
• Underapplied Overhead = \(174,000 - 152,000 = 22,000\)

Calculate unadjusted cost of goods sold

Using the Work in Process T-Account knowledge point, we find the cost of goods manufactured and transferred to finished goods, which is then sold.

• Direct materials = \(78,000\)
• Direct labor = \(112,000\)
• Applied overhead = \(152,000\)
• Total manufacturing costs = \(78,000 + 112,000 + 152,000 = 342,000\)
• Since there are no beginning or ending work in process inventories, Cost of Goods Manufactured = \(342,000\)
• Since all completed units were shipped to customers, Unadjusted Cost of Goods Sold = \(342,000\)

Calculate adjusted cost of goods sold

Using the Adjusted Cost of Goods Sold knowledge point, we adjust the unadjusted Cost of Goods Sold for the underapplied overhead.

• Because overhead is underapplied (actual costs exceeded applied costs), the actual cost of production was higher than estimated.
• Therefore, we must add the underapplied overhead to the unadjusted Cost of Goods Sold to close the overhead account.
• Adjusted Cost of Goods Sold = Unadjusted Cost of Goods Sold + Underapplied Overhead
• Adjusted Cost of Goods Sold = \(342,000 + 22,000 = 364,000\)

Answer:

Question 1

The completed T-accounts are posted as shown in the image:

• Cash Ending Balance: \(369,000\) (Credit)
• Raw Materials Ending Balance: \(5,000\) (Debit)
• Work in Process Ending Balance: \(78,000\) (Debit)
• Finished Goods Ending Balance: \(342,000\) (Debit)
• Manufacturing Overhead Ending Balance: \(22,000\) (Debit - Underapplied)
• Cost of Goods Sold Ending Balance (Unadjusted): \(342,000\) (Debit)

Question 2

The adjusted cost of goods sold for the period is:

$$ \text{Adjusted Cost of Goods Sold} = \$364,000 $$