Journal Entries, T-Accounts, Cost of Goods Manufactured and Sold

Journal Entries, T-Accounts, Cost of Goods Manufactured and Sold
During May, the following transactions were completed and reported by Jerico Company:

1. Materials purchased on account, $60,200.
2. Materials issued to production to fill job-order requisitions: direct materials, $50,000; indirect materials, $8,800.
3. Payroll for the month: direct labor, $75,000; indirect labor, $36,000; administrative, $28,000; sales, $19,000.
4. Depreciation on factory plant and equipment, $10,500.
5. Property taxes on the factory accrued during the month, $1,450.
6. Insurance on the factory expired with a credit to the prepaid insurance account, $6,200.
7. Factory utilities, $5,500.
8. Advertising paid with cash, $7,900.
9. Depreciation on office equipment, $800; on sales vehicles, $1,680.
10. Legal fees incurred but not yet paid for preparation of lease agreements, $750.
11. Overhead is charged to production at a rate of $18 per direct labor hour. Records show 4,000 direct labor hours were worked during the month.
12. Cost of jobs completed during the month, $160,000.

The company also reported the following beginning balances in its inventory accounts:

Materials Inventory	$7,500
Work-in-Process Inventory	37,000
Finished Goods Inventory	50,000

Required:
1. Prepare journal entries to record the transactions occurring in May. For a compound transaction, if an amount box does not require an entry, leave it blank.

a.	Materials
	Accounts Payable
b.	Work in Process
	Overhead Control
	Materials
c.	Work in Process
	Overhead Control
	Administrative Expense
	Selling Expense
	Wages Payable
d.	Overhead Control
	Accumulated Depreciation
e.	Overhead Control
	Property Taxes Payable
f.	Overhead Control
	Prepaid Insurance
g.	Overhead Control
	Utilities Payable
h.	Selling Expense
	Cash
i.	Administrative Expense
	Selling Expense
	Accumulated Depreciation
j.	Administrative Expense
	Accounts Payable
k.	Work in Process
	Overhead Control
l.	Finished Goods
	Work in Process

2. Prepare T-accounts for Materials Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post the entries to the T-account in the same order in which they were journalized.

Materials Inventory
Balance		(b)
(a)
Balance

Work in Process Inventory
Balance		(l)
(b)
(c)
(k)
Balance

Feedback
Set up T-accounts and consider the information that pertains to Overhead Control, Work-in-Process, Materials, and Finished Goods account. The use of T-accounts would provide a good picture of balances and transactions for the required reporting. Remember to focus on the normal balance of the accounts. What is the increasing side? The decreasing side? This will be helpful when posting the journalized transactions.

Finished Goods Inventory
Balance
(l)
Balance

Overhead Control
(b)		(k)
(c)
(d)
(e)
(f)
(g)
		Balance

3. Prepare a statement of cost of goods manufactured.

Jerico Company
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 20XX
Direct materials		$
Direct labor
Overhead:
Supplies	$
Indirect labor
Depreciation, plant, and equipment
Property taxes
Utilities, factory
Insurance
	$
Add: Overapplied overhead
Overhead applied
Manufacturing costs added		$
Add: Beginning work in process
Less: Ending work in process
Cost of goods manufactured		$

4. If the overhead variance is all allocated to cost of goods sold, by how much will cost of goods sold decrease or increase?
Decreases    by   $