Chapter 15: Source documents, journal entries, and accounts in job order costing

Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows.

a. Purchased raw materials on credit, $200,000.
b. Materials requisitions record use of the following materials for the month.

Job 136	$	48,000
Job 137		32,000
Job 138		19,200
Job 139		22,400
Job 140		6,400
Total direct materials		128,000
Indirect materials		19,500
Total materials used	$	147,500

c. Paid $15,000 cash to a computer consultant to reprogram factory equipment.
d. Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$	12,000
Job 137		10,500
Job 138		37,500
Job 139		39,000
Job 140		3,000
Total direct labor		102,000
Indirect labor		24,000
Total	$	126,000

e. Applied overhead to Jobs 136, 138, and 139.
f. Transferred Jobs 136, 138, and 139 to Finished Goods.
g. Sold Jobs 136 and 138 on credit at a total price of $525,000.
h. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Depreciation of factory building	$	68,000
Depreciation of factory equipment		36,500
Expired factory insurance		10,000
Accrued property taxes payable		35,000

i. Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

Required:
1. Prepare a job cost sheet for each job worked on during the month.

2. Prepare journal entries to record the events and transactions a through i.

Explanation:

e.	To apply overhead to jobs: [($12,000 + $37,500 + $39,000) × 200%] = $177,000
f.	To record completion of jobs: ($84,000 + $131,700 + $139,400) = $355,100
g(2).	To record cost of sales: ($84,000 + $131,700) = $215,700
i.	To apply overhead to jobs: [($10,500 + $3,000) × 200%] = $27,000

3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.

4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.