1 answer

Problem 7-58 (Algo) Tracing Costs in a Job Company (LO 7-2, 3) The following transactions occurred...

Question:

Problem 7-58 (Algo) Tracing Costs in a Job Company (LO 7-2, 3) The following transactions occurred in January at Apex Manufac

Problem 7-58 (Algo) Tracing Costs in a Job Company (LO 7-2, 3) The following transactions occurred in January at Apex Manufacturing, a custom parts supplier. Apex uses job costing. 1. Purchased $55,600 in materials on account. 2. Issued $3,400 in supplies from the materials inventory to the production department. 3. Paid for the materials purchased in transaction (1). 4. Issued $27,400 in direct materials to the production department. 5. Incurred wage costs of $61,000, which were debited to Payroll, a temporary account. Of this amount, $15,400 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $45,600 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll. 6. Recognized $29,000 in fringe benefit costs, incurred as a result of the wages paid in (5). This $29,000 was debited to Payroll and credited to Fringe Benefits Payable. 7. Analyzed the Payroll account and determined that 60 percent represented direct labor; 30 percent, indirect manufacturing labor; and 10 percent, administrative and marketing costs. 8. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $34,300. 9. Applied overhead on the basis of 160 percent of direct labor costs. 10. Recognized depreciation of $19,150 on manufacturing property, plant, and equipment. Required: a. Prepare journal entries to record these transactions. b. The balances that appeared in the accounts of Apex Manufacturing are shown as follows Ending Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Beginning $58,425 15,225 64,150 - $ 53,600 108,275 Prepare T-accounts to show the flow of costs during the period.

Answers

a. Sl No. Account titles and explanation Debit Credit
1 Materials inventory 55600
Accounts payable 55600
(Purchased materials on account)
2 Manufacturing overhead 3400
Materials inventory 3400
(Supplies issued)
3 Accounts payable 55600
Cash 55600
(Paid for the materials)
4 Work in process inventory 27400
Materials inventory 27400
(Materials issued)
5 Payroll 61000
Payroll taxes payable 15400
Cash 45600
(Wages cost incurred)
6 Payroll 29000
Fringe benefits payable 29000
(Fringe benefits due)
7 Work in process inventory (61000+29000)*60% 54000
Manufacturing overhead (61000+29000)*30% 27000
Administrative salaries (61000+29000)*10% 9000
Payroll 90000
(Assigned payroll expenses)
8 Manufacturing overhead 34300
Cash 34300
(Paid for utilities,power and miscellaneous)
9 Work in process inventory (54000*160%) 86400
Manufacturing overhead 86400
(Overhead applied)
10 Manufacturing overhead 19150
Accumulated depreciation 19150
(Depreciation recorded)
b. Materials inventory
Ref. Debit Ref. Credit
Bal. 58425 2 3400
1 55600 4 27400
114025 30800
Work in process inventory
Ref. Debit Ref. Credit
Bal. 15225 To FG 97725
4 27400 Bal. 85300
7 54000
9 86400
183025 183025
Finished goods inventory
Ref. Debit Ref. Credit
Bal. 64150 To COGS 108275
From WIP 97725 Bal. 53600
161875 161875
Cost of goods sold
Ref. Debit Ref. Credit
From FG 108275 Bal. 108275
Workings:
After posting the transactions,do the following
Cost of goods sold balance=$ 108275
This will be the only transaction in that account and will be coming from finished goods inventory
Post $ 108275 in cost of goods sold and finished goods inventory
Then,balance the FG inventory and balancing figure will be the cost of goods manufactured and transferred from WIP
Now balance Work in process inventory to find the ending balance
.

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