Chapter 15 Exercises

Step-by-Step Exercises

Record the purchase of materials in a journal entry or t-accounts:

Question 1

Direct materials costing $500,000 and indirect materials costing $50,000 were purchased on account.

Record the purchase of materials.

Question 2

Direct materials costing $250,000 and indirect materials costing $100,000 were purchased with cash.

Record the purchase of materials.

Record the use of materials in a journal entry or t-accounts:

Question 3

Direct materials costing $85,000 and indirect materials costing $10,000 were put into production.

Record the use of materials.

Question 4

The firm used 6,000 pounds of direct materials (cost = $15,000) and various indirect materials costing $2,000.

Record the use of materials.

Record the payment of direct labor costs in a journal entry or t-accounts.

Question 5

The firm paid direct labor $1,050,000 in cash to work 108,000 hours.

Record the payment of direct labor costs.

Question 6

Direct labor costs of $600,000 were accrued this period.

Record the payment of direct labor costs.

Record the application of manufacturing overhead in a journal entry or t-accounts.

Question 7

Manufacturing overhead is applied at a rate of $13 per direct labor hour. The firm actually used 14,000 direct labor hours.

Record the application of manufacturing overhead.

Question 8

Overhead is applied to production at a rate of 80% of direct labor costs. Direct labor was paid $200,000 this period.

Record the application of manufacturing overhead.

Record the incurrence of actual manufacturing overhead in a journal entry or t-accounts.

Question 9

Beefine Corporation spent $20,000 cash on factory rent, paid $10,000 cash on indirect labor costs, and recognized $5,000 in factory equipment depreciation.

Record the incurrence of actual manufacturing overhead.

Question 10

Splegle and Sons incurred manufacturing overhead costs of $100,000, including $10,000 in depreciation expense. All other costs were paid on account.

Record the incurrence of actual manufacturing overhead.

Record the completion of goods in a journal entry or t-accounts.

Question 11

Goods units worth $125,000 were transferred out of work-in-process inventory this period, as well as goods costing $25,000 that were abnormally spoiled.

Record the completion of goods.

Question 12

Good units costing $50,000 to manufacture were completed and transferred to finished goods inventory this period. Normal spoilage was $10,000.

Record the completion of goods.

Record the incurrence of rework costs in a journal entry or t-accounts.

Question 13

Morrison Company incurred $3,000 in rework costs, half of which was considered a normal part of the production process, and half of which was considered abnormal. Rework costs were paid in cash.

Record the incurrence of rework costs.

Question 14

Peese, Inc. spent $14,000 to repair goods damaged as a normal part of the production process and spent $8,000 to repair goods damaged in an accident. Rework costs were paid in cash.

Record the incurrence of rework costs.

Record the sale of goods in a journal entry or t-accounts.

Question 15

Goods costing $700,000 to manufacture were sold this period.

Record the sale of goods.

Question 16

Sales this period were 100,000 units costing $2,000,000 to manufacture.

Record the sale of goods.

Record the incurrence of period expenses in a journal entry or t-accounts.

Question 17

Selling, general, and administrative costs paid on account totaled $150,000 this period. In addition, depreciation on office equipment was $24,000.

Record the incurrence of period expenses.

Question 18

The firm incurred $50,000 in administrative salaries and $140,000 in office expenses, all paid in cash. In addition, $30,000 in depreciation on office equipment was recognized. Selling expenses of $58,000 were paid in cash.

Record the incurrence of period expenses.

Record the entry to close manufacturing overhead in a journal entry or t-account.

Question 19

The ending balances before adjustment were as follows: Work-in-Process Inventory $250,000, Finished Goods Inventory $500,000, and Cost of Goods Sold $750,000. Actual overhead costs were $1,000,000, and $1,300,000 in overhead was applied to production.

Record the entry to close manufacturing overhead.

Question 20

The balance before adjustment in Work-in-Process Inventory was 80% of the balance in Cost of Goods Sold, and the balance in Finished Goods Inventory before adjustment was 70% of that in Cost of Goods Sold. A total of $2,250,000 was spent on manufacturing overhead, but only $2,000,000 in overhead costs were applied to production.

Record the entry to close manufacturing overhead.

 

Complete Problems

Question 21

Boussard Company, which uses normal job costing, incurred the following costs last period
(A indicates paid on account; C indicates paid in cash):

Direct materials purchases	200,000	A
Indirect materials purchases	12,000	A
Direct materials used	180,000
Indirect materials used	10,000
Direct labor	300,000	A
Misc. manufacturing overhead incurred	480,000	C
Manufacturing overhead applied	450,000
Good units completed	875,000
Spoiled units (normal)	25,000
Spoiled units (abnormal, incomplete)	10,000
Rework (normal)	2,000	C
Rework (abnormal)	8,000	C
Units sold	850,000
Period expenses	500,000	C

Boussard had no beginning inventories of any kind last period. The beginning balance in the cash account was $1,000,000.

Make all journal entries in the normal costing system for the period (including the entry to close manufacturing overhead) and post them to t-accounts.

 

Question 22

Barry, Inc. had a beginning cash balance of $400,000, and they apply manufacturing overhead to products at a rate of $60 per machine hour. In June, Barry only worked on one job, which they began June 1, purchasing $400,000 in materials ($75,000 of which were indirect) on account for use on the job. As it turned out, only $300,000 in direct materials were needed for the job (as well as all indirect materials purchased), which used 10,000 machine hours. Barry paid labor $100,000 cash for work on the job, which was completed on June 30. The job did not ship to the customer until a week later. During the month of June, Barry paid $100,000 cash for utilities (90% for the factory and 10% for the office), paid $50,000 cash for factory rent and $5,000 cash for office rent, paid $120,000 for miscellaneous factory overhead and $40,000 for miscellaneous office overhead on account, and recognized $75,000 in factory equipment depreciation and $30,000 in office equipment depreciation. There were no defects in manufacturing on the job.

Make journal entries for all transactions that occurred in the month of June and post them to t-accounts. Overhead is not closed until the end of the year.

Question 23

At the beginning of April, Dumas Company had no beginning raw materials or finished goods inventories. Beginning work-in-process inventory was $2,250 and consisted of one job—Job 5130. Beginning cash was $120,000. The firm worked on three jobs during April, purchasing all materials used during the period, and applying manufacturing overhead at a rate of 120% of direct labor costs (which are paid in cash):

Description	Job 5130	Job 2236	Job 4727
Direct materials	$5,000	$7,000	$3,500
Direct labor	8,000	6,000	2,000

At the end of April, Jobs 5130 and 2236 were completed and Job 2236 was shipped to the customer.

Dumas paid $50,000 cash for period expenses and $15,000 cash for manufacturing overhead costs during April. Dumas also recorded $2,000 in factory equipment depreciation and $500 in office equipment depreciation during April.

Make all possible journal entries associated with the three jobs and post them to t-accounts. Overhead is not closed until the end of the year.

Question 24

Fillion Company uses job costing and applies manufacturing overhead costs to jobs at a rate of 70% of direct labor cost. Beginning inventories were $60,000 in raw materials, $150,000 in work in process, and $240,000 in finished goods. Beginning cash was $1,300,000. This period, the following transactions occurred:

• Direct materials worth $300,000 and indirect materials worth $72,000 were purchased on account.
• Direct materials worth $345,000 and indirect materials worth $78,000 were put into production.
• Direct labor was paid $270,000 cash.
• Actual manufacturing overhead costs other than indirect materials were $372,000, all paid in cash except $9,000 in depreciation expense.
• Goods costing $900,000 were transferred out of Work-in-Process Inventory, $18,000 of which were spoiled as a normal part of the production process, and $12,000 of which were abnormally spoiled.
• The company incurred normal rework costs of $6,000 and abnormal rework costs of $9,000, paid in cash.
• The company incurred $600,000 in period expenses, all paid in cash except $120,000 in depreciation expense.
• The company sold goods costing $783,000.

Make all journal entries in the normal costing system for the period (including the entry to close manufacturing overhead) and post them to t-accounts.

Question 25

Bishop Corporation uses normal process costing (weighted average method) and applies manufacturing overhead at a rate of 70% of direct labor costs. Beginning raw materials inventory was $75,000 and beginning finished goods inventory was $150,000. Beginning cash was $500,000. Bishop has two departments: Molding and Assembly (beginning work-in-process balance = $50,000 in Molding and $60,000 in Assembly). Altogether, Bishop purchased $500,000 in materials on account last period. Bishop also spent $125,000 cash on manufacturing overhead and recognized $20,000 in factory equipment depreciation. Bishop accrued $200,000 in direct labor costs in Molding and $150,000 in direct labor costs in Assembly. Bishop used $250,000 worth of direct materials in Molding, $200,000 worth of direct materials in Assembly, and $80,000 in indirect materials. The process costing report at the end of the period was as follows:

Description	Molding	Assembly
Cost of goods completed and transferred out	540,000	807,244
Cost of ending work-in-process	88,000	233,469
Cost of abnormal spoilage	12,000	14,287

Bishop sold goods costing $800,000 and spent $210,000 cash on period expenses.

Make all journal entries for the period (including the entry to close manufacturing overhead) and post them to t-accounts.

Question 26

Berger Company uses job costing and applies overhead to jobs at a rate of 150% of direct labor costs. Beginning balances were $4,000 in Raw Materials Inventory, $23,200 in Work-in-Process Inventory, $9,500 in Finished Goods Inventory, $80,000 in Cash, $15,000 in Accounts Payable, and $68,000 in Accumulated Depreciation.

Berger experienced the following last period. Enter each transaction:

• Purchased 12,000 pounds of direct materials at $1.10 per pound and $4,000 worth of indirect materials on account.
• Used 8,000 pounds of direct materials and $4,200 in indirect materials.
• Paid direct labor $40,000 in cash.
• Incurred $7,000 for factory rent, $6,500 for indirect labor, and $11,000 in miscellaneous manufacturing overhead, all paid in cash, and recorded $6,000 in factory equipment depreciation.
• Completed goods costing $87,000 to manufacture, including $1,000 of spoilage normal for the production process and $500 of abnormal spoilage.
• Incurred normal rework costs of $1,200 and abnormal rework costs of $800, paid in cash.
• Sold goods costing $90,000 to manufacture.
• Incurred administrative expenses of $52,000 and selling expenses of $28,000, both on account, and recorded $4,200 in office equipment

Make all journal entries for the period (including the entry to close manufacturing overhead) and post them to t-accounts.

 

Assignment Problem

Note: Check figures are not provided for assignment problems so your instructor may use them for homework.

Question 27

Jackson Company uses job costing and applies overhead to jobs at a rate of $12 per direct labor hour. Beginning inventories were $15,000 in raw materials, $260,000 in work in process, and $150,000 in finished goods. The beginning Cash account balance was $800,000. This year, Jackson purchased 10,000 pounds of direct materials at $40 per pound and $80,000 in indirect materials on account. Jackson used 9,500 pounds of direct materials and $85,000 in indirect materials. Direct labor worked 35,000 hours and indirect labor worked 7,500 hours. All labor was paid $10 per hour, in cash. Through the year, Jackson incurred $90,000 for factory rent and $35,000 in miscellaneous manufacturing overhead, all paid in cash, and recorded $80,000 in factory equipment depreciation. During the year, Jackson transferred goods out of Work-in-Process Inventory costing $1,160,000, $100,000 of which was spoilage normal for the production process and $60,000 of which was abnormal spoilage. Jackson also incurred normal rework costs of $25,000 and abnormal rework costs of $30,000, paid in cash. Goods costing $950,000 were sold. Jackson incurred administrative expenses of $50,000 and selling expenses of $30,000, both paid in cash, and recorded $18,000 in office equipment depreciation.

Make all journal entries in the normal costing system for the period (including the entry to close manufacturing overhead) and post them to t-accounts.

Challenge Problem

(You will need to use the process costing technique from Chapter 8 to determine the costs of goods transferred out, ending work-in-process inventory, and the loss from abnormal spoilage.)

Question 28

Mustine Company uses the weighted average method of process costing to account for the costs in their three production departments. Goods are transferred from Department 1 to Department 2 to Department 3, where they are completed. Mustine applies manufacturing overhead at a rate of 100% of direct labor costs in Department 1, 25% of direct labor costs in Department 2, and 150% of direct labor costs in Department 3. All direct materials are added at the beginning of production in each department, and conversion costs are incurred evenly throughout production in each department. The following information is available for each department in April:

Description	Department 1	Department 2	Department 3
Beginning WIP	2,000 units	1,500 units	1,800 units
DM	4,000.00	1,000.00	3,110.00
CC	3,625.00	1,950.00	4,765.00
TI		5,579.50	11,428.75
Units started	18,000
Units completed	15,000 total (500 spoiled)	14,000 total (750 spoiled)	14,500 total (200 spoiled)
Normal spoilage	2% of good units	2% of good units	1% of good units
Ending WIP	50% complete	70% complete	30% complete
Costs incurred	25,000 DM 20,000 DL	15,000 DM 20,000 DL	30,000 DM 30,000 DL

Beginning raw materials inventory in April was $10,000, and there was no beginning finished goods inventory. The beginning balance in Cash was $200,000. All materials purchases are paid on account. All labor is paid in cash. This period, Mustine purchased $80,000 in materials, $15,000 in indirect materials were placed into production, indirect labor was paid $10,000, factory equipment depreciation was $12,000, and miscellaneous factory expenses (paid on account) were $25,000. Mustine sold 14,000 units. Mustine also paid $40,000 in cash for selling, general, and administrative expenses, and took $8,000 in office equipment depreciation.

Make all journal entries in the normal costing system for the period (including the entry to close manufacturing overhead) and post them to t-accounts.

Pre-Assessment Problem

Use this problem to check whether you are fully prepared for the assessment. Work the problem under assessment conditions – don’t use any notes or other materials!

Question 29

Collecano, Inc., which uses normal job costing, incurred the following costs last period. All amounts paid to external parties were in cash. Collecano had no beginning inventories of any kind last period. Beginning balances were $5,000,000 in Cash and $200,000 in Accumulated Depreciation.

Direct materials purchases	400,000
Indirect materials purchases	25,000
Direct materials used	350,000
Indirect materials used	16,000
Direct labor	620,000
Miscellaneous manufacturing overhead incurred	950,000
Factory equipment depreciation	30,000
Manufacturing overhead applied	900,000
Cost of good units completed	1,700,000
Cost of spoiled units completed (abnormal)	20,000
Cost of rework (normal)	4,000
Cost of rework (abnormal)	15,000
Cost of units sold	1,650,000
Cash period expenses	1,000,000
Office equipment depreciation	2,000

Make all journal entries in the normal costing system for the period (including the entry to close manufacturing overhead) and post them to t-accounts.