E222 Preparing Journal Entries LO 2S1 Floyds Auto Repair Sho

E2-22 Preparing Journal Entries [LO 2-S1] Floyd\'s Auto Repair Shop uses a job order cost system to track the cost of each repair. Floyd\'s applies its garage or shop overhead at a rate of $20 per direct labor hour spent on each repair. Floyd\'s uses the following accounts to track the cost of all repairs: Raw Materials (parts and supplies) Repair Jobs in Process Cost of Repairs Completed and Sold Garage/Shop* Overhead Costs Because an auto shop does not manufacture a product, the overhead cost would include all of the indirect costs that are incurred in the garage or shop that cannot be traced to a specific repair job. The following transactions occurred during the most recent month: (a) Purchased raw materials (parts and supplies) on account $16,000 (b) Used $14,000 in raw materials (parts and supplies). Of this, $10,000 was for major parts that were traceable to individual repair jobs, and the remainder was for incidental supplies such as lubricants, rags, fuel, and so on. (c) Recorded a total of $12,000 in direct labor cost (for 500 hours) that are owed but not yet paid. (d) Applied overhead to repair jobs at a rate of $20 per direct labor hour. (e) Recorded the following actual overhead costs Rent on garage (pre-paid in the prior month) Depreciation on repair equipment Garage supervisor\'s salary (owed but not yet paid) $ 8,000 2,500 4,000 (f) Completed repair jobs costing $40,000 and charged customers at cost plus an additional 30 percent. (Note: You can bypass the Finished Goods Inventory account, which is not appropriate in this context.) Required Prepare T-accounts for transactions (a) ( using the account names shown and other appropriate accounts such as Cash, Payables, Accumulated Depreciation, Prepaids, and Sales Revenue. (If no entry is required for a transaction/event, select \"No Journal Entry Required\" in the first account field.)

Solution

Floyd\'s Auto Repair Shop Job Order Costing Journal Sl. No. Account Titles Debit $ Credit $ a. Materials inventory 16000 Accounts payable 16000 b. Work-in-process 14000 Inventories 14000 Manufacturing overheads 4000 Inventories 4000 c. Work-in-process 12000 Accounts payable 12000 d. Work-in-process 10000 Manufacturing overheads 10000 e. Manufacturing overheads 14500 Prepaid rent 8000 Accumulated depreciation 2500 Accounts payable 4000 f. Finished Work 36000 Work-in-process 36000 Accounts receivable 46800 Sales Revenue 46800 Cost of goods Sold 8500 Manufacturing overheads 8500 Ledgers Work-in-Process A/c Account Titles Debit $ Credit $ Balance Inventories 14000 14000 Accounts payable 12000 26000 Manufacturing overheads 10000 36000 Finished work 36000 0 Manufacturing overheads A/c Account Titles Debit $ Credit $ Balance Inventories 4000 4000 Work-in-Process 10000 -6000 Prepaid rent 8000 2000 Acc. Depreciation 2500 4500 Accounts payables 4000 8500 Cost of goods sold 8500 0 Accounts Payables A/c Account Titles Debit $ Credit $ Balance Materials Inventory 16000 16000 Work-in-Process 12000 28000 Manufacturing overheads 4000 32000 Materials Inventory A/c Account Titles Debit $ Credit $ Balance Accounts payable 16000 16000 Inventory A/c Account Titles Debit $ Credit $ Balance Work-in-Process 14000 14000 Manufacturing overheads 4000 10000 Prepaid rent A/c Account Titles Debit $ Credit $ Balance Opening balance 8000 8000 Manufacturing overheads 8000 0 Accumulated Depreciation A/c Account Titles Debit $ Credit $ Balance Manufacturing overheads 2500 2500 Finished Work A/c Account Titles Debit $ Credit $ Balance Work-in-Process 36000 36000 Accounts Receivable A/c Account Titles Debit $ Credit $ Balance Sales revenue 46800 46800 Sales revenue A/c Account Titles Debit $ Credit $ Balance Accounts receivable 46800 46800 Cost of goods sold A/c Account Titles Debit $ Credit $ Balance Manufacturing overheads 8500 8500