Custom Cabinetry has one job in process Job 120 as of June 3

Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $8,900, direct labor of $3,400, and applied overhead of $2,890. Custom Cabinetry applies overhead at the rate of 85% of direct labor cost. During July, Job 120 is sold (on account) for $26,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.

1. Prepare journal entries for the following in July.

2. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory general ledger accounts. (Assume there are no jobs in Finished Goods Inventory as of June 30.)

July Product Costs	Job 120		Job 121		Job 122		Total
Direct materials	$	1,600		$	8,600		$	2,600		$	12,800
Direct labor		2,900			4,800			3,400			11,100
Overhead applied		?			?			?			?

Solution

Job sheet job 120 job121 job122 Total Beginning bal Direct materials 8,900 8,900 Direct labor 3,400 3,400 applied overhead 2,890 2,890 Total beginning bal 15,190 15,190 cost added during the year Direct materials 1,600 8,600 2,600 12,800 Direct labor 2,900 4,800 3,400 11,100 applied overhead 2465 4080 2890 9435 total cost added during the year 6,965 17480 8890 33,335 total cost of job 22,155 17480 8890 48,525 1) Journal entries No.                General Journal                       Debit Credit a. Work in process inventory 12,800 Raw materials inventory 12,800 b. Work in process inventory 11,100 factory wages payable 11,100 c. work in process inventory 9,435 Manufacturing overhead 9,435 d. Account receivable 26,000 Sales 26,000 e. Cost of goods sold 22,155 Finished goods inventory 22,155 work in process finished goods Job job 122 job 121 Direct materials 2,600 8,600 direct labor 3,400 4,800 overhead applied 2890 4080 total cost 8,890 17,480