2 Allenton Company is a manufacturing firm that uses joborde

2. Allenton Company is a manufacturing firm that uses job-order costing. The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 31,000 machine-hours and incur $248,000 in manufacturing overhead cost. The following transactions were recorded for the year: a. Raw materials were purchased, $412,419. b. Raw materials were requisitioned for use in production, $409,000 ($388,000 direct and $21,000 indirect). c. The following employee costs were incurred: direct labor, $145,210; indirect labor, $61,356; and administrative salaries, $198,450. d. Factory utility costs, $14,815. e. Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities. f. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 29,067 machine-hours (Hint: you need to compute a predetermined overhead rate to apply overhead). g. The cost of goods manufactured for the year was $783,075. h. Sales for the year totaled $1,107,000 and the costs on the job cost sheets of the goods that were sold totaled $768,990. Required (4 Points): Prepare the appropriate journal entry for each of the items above.

Solution

Pre-determined OH rate: Etsimated OH/ Estimated DLH 248000 /31000 = $ 8 per MH Journal entries: S.no. Accounts title and explanation Debit $ Credit$ a. Raw material Inventory Dr. 412419     Accounts payable Account 412419 b. Work in Process inventory Dr. 388000 Manufacturing Overheads Dr. 21000     Raw material inventory Account 409000 c. Work in process Inventory Dr. 145210 Manufacturing OH Account Dr. 61356 Selling and admin OH Account Dr. 198450      Wages payable account 405016 d. Manufacturing Overheads Account Dr. 14815      Cash account 14815 e. Manufacturing OH Account Dr. 114000 Selling and admin OH Account Dr. 7000      Accumulated depreciation 121000 f. Work in process Inventory Account Dr. 232536      Manufacturing Overheads Account (29067*8) 232536 g. Finished Goods inventory Dr. 783075    Work in process inventory Account 783075 h. Accounts receivable Dr. 1107000     Sales revenue 1107000 Cost f Goods sold Account Dr. 768990      Finished Goods inventory Account 768990