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 raw materials and overhead

Using the T-Account Analysis and Cost Flow Analysis knowledge points:

• Beginning balances are all \(0\).
• Raw materials purchased: \(a = \$94,000\) (Debit Raw Materials, Credit Cash).
• Raw materials used: \(\$89,000\). Direct materials \(b = \$78,000\) (Debit Work in Process). Indirect materials \(b = \$89,000 - \$78,000 = \$11,000\) (Debit Manufacturing Overhead).
• Labor paid: \(\$132,000\). Direct labor \(c = \$112,000\) (Debit Work in Process). Indirect labor \(c = \$132,000 - \$112,000 = \$20,000\) (Debit Manufacturing Overhead).
• Additional overhead paid: \(d = \$143,000\) (Debit Manufacturing Overhead, Credit Cash).

Determine work in process and finished goods

Using the Work in Process T-Account knowledge point:

• Applied overhead: \(e = \$152,000\) (Debit Work in Process, Credit Manufacturing Overhead).
• Total Work in Process debits: \(\$78,000 + \$112,000 + \$152,000 = \$342,000\).
• Since all jobs in process were completed, Ending Work in Process is \(0\).
• Cost of Goods Manufactured transferred to Finished Goods: \(f = \$342,000\) (Credit Work in Process, Debit Finished Goods).
• Since all completed jobs were shipped, Ending Finished Goods is \(0\).
• Cost of Goods Sold before adjustment: \(g = \$342,000\) (Credit Finished Goods, Debit Cost of Goods Sold).

Calculate underapplied or overapplied overhead

Using the Manufacturing Overhead T-Account knowledge point:

• Actual overhead debits:

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

• Applied overhead credit: \(\$152,000\).
• Underapplied overhead:

$$ \$174,000 - \$152,000 = \$22,000 \quad (\text{Debit balance remaining in Manufacturing Overhead}) $$

Close overhead to cost of goods sold

Using the Cost Flow Analysis knowledge point:

• To close the underapplied overhead, credit Manufacturing Overhead by \(\$22,000\) (\(h\)) and debit Cost of Goods Sold by \(\$22,000\) (\(h\)).
• Adjusted Cost of Goods Sold:

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

Answer:

Question 1

The completed T-accounts with posted transactions are 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. \(11,000\) (Indirect)
• b. \(78,000\) (Direct)
• Ending balance (Debit) = \(5,000\)

Work in Process

• Debit:
• Beginning balance = \(0\)
• b. \(78,000\)
• c. \(112,000\)
• e. \(152,000\)
• Credit:
• f. \(342,000\)
• Ending balance = \(0\)

Finished Goods

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

Manufacturing Overhead

• Debit:
• Beginning balance = \(0\)
• b. \(11,000\)
• c. \(20,000\)
• d. \(143,000\)
• Credit:
• e. \(152,000\)
• h. \(22,000\) (Closeout)
• Ending balance = \(0\)

Cost of Goods Sold

• Debit:
• Beginning balance = \(0\)
• g. \(342,000\)
• h. \(22,000\) (Underapplied overhead adjustment)
• Ending balance (Debit) = \(364,000\)

Question 2

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