ABC Corp Is a manufacturing firm that uses job order costing

ABC, Corp. Is a manufacturing firm that uses job -order costing. The company applies overhead to jobs using a predetermined rate based on machine ing of the year, the company estimated that it would work 50.000 machine-hours and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year: 2b. Raw materials were requisitioned for use in production, $175,000 ($100,000 direct and $75000 Indirect, c. The following employee costs were incurred: direct labor, $215.000, indirect labor, $40,000, and accountant salaries, $85.000. d. Advertising costs, $225,000. e. Factory rent costs, $25,000. g. Mar Depreciat for the year was $1 00 of which 8000o is related to factory operations and $70,000 is related to selling. general and administrative activities. h. The cost of goods manufactured for the year was $490,000. L Sales for the year totaled $980,000 and the costs on the job cost sheets of the goods that were sold totaled $350,000. J. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold overhead was applied to jobs. The actual level of activity for the year was 25,000 machine-hours Prepare the were conducted in cash. te journal entry for each of the items above (a. through jJ. You can assume that all transactions with employees, customers, and suppliers ?,n

Solution

Transaction Account Titles and Explanation Debit Credit a. Raw materials inventory 325000 Cash 325000 (To record raw materials purchased for cash) b. Work in process inventory 100000 Manufacturing overhead 75000 Raw Materials inventory 175000 (To record raw materials requisitioned) c. Work in process inventory 215000 Manufacturing overhead 40000 Salaries expense 85000 Cash 340000 (To record employee costs incurred) d. Advertising expense 225000 Cash 225000 (To record advertising expense paid) e. Manufacturing overhead 25000 Cash 25000 (To record factory rent paid) f. Manufacturing overhead 80000 Depreciation expense 70000 Accumulated depreciation 150000 (To record depreciation) g. Work in process inventory 225000 Manufacturing overhead ($450000 x 25000/50000) 225000 (To record manufacturing overhead applied) h. Finished goods inventory 490000 Work in process inventory 490000 (To record cost of goods manufactured) i. Cash 980000 Sales revenue 980000 (To record cash sales) Cost of goods sold 350000 Finished goods inventory 350000 (To record the cost of the goods sold) j. Manufacturing overheads 5000 Cost of goods sold 5000 (To close the manufacturing overhead account)