Question & Answer: Loft Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Jo…..

Loft Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the raw materials inventory account. During the month of January, Lott Company began production on Job 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during this month.

Purchased additional raw materials of $90,000 on account.

Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes.

Incurred manufacturing overhead costs as follows: indirect materials $17,000, indirect labor $20,000, depreciation expense on equipment $12,000, and various other manufacturing overhead costs on account $16,000.

Assigned direct materials and direct labor to jobs as follows

Job No.                        Direct Materials                     Direct Labor

50                               $10,000                                  $5,000

51                               39,000                                  25,000

52                               30,000                                  20,000

1. Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.