Question & Answer: Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s…..

Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s production activities during May 2013 follows.

a.	Purchased raw materials on credit, $240,000.
b.	Paid $129,600 cash for factory wages.
c.	Paid $15,750 cash to a computer consultant to reprogram factory equipment.
d.	Materials requisitions record use of the following materials for the month.


Job 136	$	48,500
Job 137		33,500
Job 138		19,200
Job 139		22,600
Job 140		6,800

Total direct materials		130,600
Indirect materials		20,000

Total materials used	$	150,600

e.	Time tickets record use of the following labor for the month.


Job 136	$	12,100
Job 137		10,500
Job 138		37,900
Job 139		39,400
Job 140		3,200

Total direct labor		103,100
Indirect labor		26,500

Total	$	129,600

f.	Applied overhead to Jobs 136, 138, and 139.
g.	Transferred Jobs 136, 138, and 139 to Finished Goods.
h.	Sold Jobs 136 and 138 on credit at a total price of $545,000.
i.	The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).


Depreciation of factory building	$	69,000
Depreciation of factory equipment		37,000
Expired factory insurance		11,000
Accrued property taxes payable		36,500

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

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 j.

Prepare T-accounts for each of the following general ledger accounts, each of which started the month with a zero balance: Raw Materials Inventory, Goods in Process Inventory, Finished Goods Inventory, Factory Payroll, Factory Overhead, Cost of Goods Sold. Then post the journal entries to these T-accounts and determine the balance of each account

Expert Answer

Solution:

1) Preparing a Job Cost Sheet for Each Job Worked on During the Month:

	Job 136	Job 137	Job 138	Job 139	Job 140
Materials	$48,500	$33,500	$19,200	$22,600	$6,800
Labor	$12,100	$10,500	$37,900	$39,400	$3,200
Overhead (200% of Labor)	$24,200	$21,000	$75,800	$78,800	$6,400
Total Cost	$84,800	$65,000	$132,900	$140,800	$16,400

2) Preparing Journal Entries to Record the Events and Transactions a through j:

Event	General journal	Debit	Credit
a	Raw Materials Inventory	$240,000
	Accounts Payable		$240,000

b	Factory Payroll	$129,600
	Cash		$129,600

c	Factory Overhead	$15,750
	Cash		$15,750

d	Goods in process inventory	$130,600
	Factory overhead	$20,000
	Raw materials inventory		$150,600

e	Goods in process inventory	$103,100
	Factory overhead	$26,500
	Factory payroll		$129,600

f	Goods in process inventory	$178,800
	Factory Overhead		$178,800

g	Finished Goods Inventory	$358,500
	Goods in process inventory		$358,500

h (1)	Accounts Receivable	$545,000
	Sales		$545,000

h (2)	Cost of goods sold	$217,700
	Finished goods inventory		$217,700

i	Factory Overhead	$153,500
	Accum. depreciation – Factory building		$69,000
	Accum. depreciation – Factory equipment		$37,000
	Prepaid insurance		$11,000
	Property taxes payable		$36,500

j	Goods in process inventory	$27,400
	Factory overhead		$27,400

3) Preparing T-Accounts for the Each of the Following General Ledger Accounts:

Raw Materials Inventory
a	$240,000
		$150,600	d
Ending Balance	$89,400

Factory Payroll
b	$129,600
		$129,600	e
Ending Balance	$0

Goods In Process Inventory
d	$130,600
e	$103,100
f	$178,800
		$358,500	g
j	$27,400
Ending Balance	$81,400

Factory Overehead
c	$15,750
d	$20,000
e	$26,500
		$178,800	f
i	$153,500	$27,400	j
Ending Balance	$9,550

Finished Goods Inventory
g	$358,500
		$217,700	h
Ending Balance	$140,800

Cost of Goods Sold
h	$217,700
Ending Balance	$217,700

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