Question

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 the transactions and T-accounts

We are given transactions for Jurven Enterprises, which has no beginning inventories:

• a. Purchased \$94,000 in raw materials for cash.
• b. \$89,000 in raw materials were used in production. Direct materials = \$78,000; Indirect materials = \$89,000 - \$78,000 = \$11,000.
• c. Paid employees \$132,000 cash. Direct labor = \$112,000; Indirect labor = \$132,000 - \$112,000 = \$20,000.
• d. Paid \$143,000 for additional manufacturing overhead costs.
• e. Applied manufacturing overhead of \$152,000 to production.
• 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.

Let's trace the T-accounts based on these transactions to find the unadjusted Cost of Goods Sold and the overhead variance.

Determine Work in Process and Finished Goods flows

Using the Work in Process T-Account and Cost Flow Analysis:

• Beginning balance = \$0
• Direct materials (b) = \$78,000 (Debit)
• Direct labor (c) = \$112,000 (Debit)
• Applied overhead (e) = \$152,000 (Debit)
• Total manufacturing costs = \$78,000 + \$112,000 + \$152,000 = \$342,000.
• Since all jobs in process were completed (f), the Cost of Goods Manufactured transferred to Finished Goods is \$342,000 (Credit to WIP, Debit to Finished Goods).
• Since all completed jobs were shipped to customers (g), the unadjusted Cost of Goods Sold is \$342,000 (Credit to Finished Goods, Debit to Cost of Goods Sold).

Calculate underapplied or overapplied overhead

Using the Manufacturing Overhead T-Account:

• Actual overhead costs (Debits):
• Indirect materials (b) = \$11,000
• Indirect labor (c) = \$20,000
• Additional overhead (d) = \$143,000
• Total actual overhead = \$11,000 + \$20,000 + \$143,000 = \$174,000.
• Applied overhead (Credit):
• Applied overhead (e) = \$152,000.
• Overhead variance:
• Actual overhead (\$174,000) > Applied overhead (\$152,000).
• Underapplied overhead = \$174,000 - \$152,000 = \$22,000.

Calculate the adjusted Cost of Goods Sold

Using T-Account Analysis:

• Unadjusted Cost of Goods Sold = \$342,000.
• Since overhead is underapplied by \$22,000, actual costs were higher than applied costs. We must close this variance by debiting Cost of Goods Sold.
• 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 follows:

Cash

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

Raw Materials

• Debit:
• Beginning balance = \$0
• a. \$94,000
• Credit:
• b. \$89,000
• Ending balance (Debit): \$5,000

Work in Process

• Debit:
• Beginning balance = \$0
• b. \$78,000 (Direct materials)
• c. \$112,000 (Direct labor)
• e. \$152,000 (Applied overhead)
• Credit:
• f. \$342,000 (Cost of Goods Manufactured)
• Ending balance (Debit): \$0

Finished Goods

• Debit:
• Beginning balance = \$0
• f. \$342,000
• Credit:
• g. \$342,000
• Ending balance (Debit): \$0

Manufacturing Overhead

• Debit (Actual):
• b. \$11,000 (Indirect materials)
• c. \$20,000 (Indirect labor)
• d. \$143,000 (Other overhead)
• Credit (Applied):
• e. \$152,000
• Underapplied Overhead (Debit balance before closing): \$22,000

Cost of Goods Sold

• Debit:
• g. \$342,000 (Unadjusted COGS)
• h. \$22,000 (Close underapplied overhead)
• Adjusted Ending balance (Debit): \$364,000

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Question 2

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