T13assi G Nrrent Print Verify Exercise 15 9 Journal Entries

221t13assi G Nrrent Print Vieryv1exercise 15 9 Journal Entries For

Prepare journal entries for various manufacturing and cost accounting activities based on provided data, including inventory transactions, factory costs, labor costs, overhead, and product sales. Include all relevant debits and credits to accurately reflect the company's transactions during the specified period. The exercises involve analyzing cost flows, calculating predetermined overhead rates, adjusting for over- or under-applied overhead, preparing manufacturing statements, and creating appropriate journal entries to record costs, overhead, and production activities.

Paper For Above instruction

The following analysis focuses on journal entries and cost accounting procedures relevant to Lock-Dolvn Company and other entities, emphasizing the importance of accurate financial recording in manufacturing environments. The exercises illustrate essential principles of job order costing, overhead application, analyzing cost flows, and preparing financial statements for manufacturing firms, providing comprehensive insights into manufacturing accounting practices.

During May, Lock-Dolvn Company engaged in several cost transactions including raw materials purchases, payroll disbursements, and overhead costs. The initial step involves recording raw materials purchases by debiting Raw Materials Inventory and crediting Cash. With raw materials costing 190,000 paid with cash, the journal entry is:

Raw Materials Inventory  190,000

Cash                              190,000

Factory payroll costs, totaling 415,000, paid in cash, are journalized by debiting Factory Payroll Expense and crediting Cash:

Factory Payroll Expense  415,000

Cash                                   415,000

To assign factory overhead, which includes indirect materials (12,000), indirect labor (75,000), and other overhead costs (103,500), the total overhead cost is summarized and allocated at the predetermined rate based on direct labor costs. The predetermined overhead rate is 65% of direct labor costs.

The overhead applied during May is:

Overhead Applied = 65% of Direct Labor Cost

Assuming direct labor cost is known, the journal entries for overhead application include debiting Work in Process and crediting Manufacturing Overhead, reflecting the application of overhead to jobs:

Work in Process  (amount calculated)

Manufacturing Overhead  (amount applied)

Similarly, costs related to direct labor are debited to Work in Process, and cash payments for labor are credited accordingly. For example, if direct labor used is a part of total factory payroll, the journal entry might be:

Work in Process  (direct labor amount)

Cash                       (direct labor amount)

Upon completion of jobs, costs are transferred from Work in Process to Finished Goods Inventory, and when goods are sold, the costs move from Finished Goods to Cost of Goods Sold, reflecting the sale in revenue and related expenses.

For analytical purposes, the exercise involves calculating the cost of raw materials requisitioned for each job, direct labor incurred, and overhead applied. If, for instance, three jobs—Job 102, 103, and 104—have accumulated costs in June, their costs are determined by summing direct materials, direct labor, and applied overhead, based on the predetermined rate.

To determine the raw materials used for each job in June, the analysis involves allocating the requisitioned materials based on the cost sheets, which specify amounts for each job. This allocation is essential for accurately associating costs to specific jobs, aiding in proper job costing and profitability analysis.

Similarly, direct labor costs for each job are calculated from labor time tickets, with total direct labor costs assigned based on labor hours and wage rates. The overhead applied is computed using the predetermined rate, multiplying the direct labor costs by 65%.

For example, if Job 102 incurred 4,000 of direct labor cost, the overhead applied would be:

Overhead = 65% of 4,000 = 2,600

Understanding these allocations provides crucial insights into the total cost of jobs and supports managerial decisions regarding pricing and production efficiency.

The exercises also cover adjusting under- or over-applied overhead at the end of the period. Actual overhead costs incurred during June are compared to overhead applied, and any difference is adjusted by closing the variance into the Cost of Goods Sold account. If overhead applied exceeds actual costs, the excess is debited from Manufacturing Overhead and credited to Cost of Goods Sold, or vice versa.

The manufacturing statement consolidates all manufacturing costs, including direct materials, direct labor, and factory overhead, into the total manufacturing cost for the period. This statement assists in understanding the flow of costs through the production process and the creation of inventories.

In conclusion, the detailed journal entries, cost calculations, and adjustments are critical for accurate financial reporting and managerial decision-making in manufacturing companies. Proper application of job order costing, overhead allocation, and inventory management ensures precise cost control and profitability analysis, which are essential for maintaining competitive advantage.

References

  • Drury, C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning.
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting (16th ed.). McGraw-Hill Education.
  • Horngren, C. T., Datar, S. M., & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis (15th ed.). Pearson Education.
  • Kaplan, R. S., & Anderson, S. R. (2004). Time-Driven Activity-Based Costing. Harvard Business Review.
  • Blocher, E., Stout, D., Juras, P., & Cokins, G. (2019). Cost Management: A Strategic Emphasis (8th ed.). McGraw-Hill Education.
  • Cole, R. E., & O'Farrell, M. (2014). Introduction to Managerial Cost Accounting. McGraw-Hill Education.
  • Hilton, R. W., & Platt, D. E. (2013). Managerial Accounting: Creating Value in a Dynamic Business Environment (10th ed.). McGraw-Hill Education.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial & Managerial Accounting (12th ed.). Wiley.
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  • Shim, J. K., & Siegel, J. G. (2016). Financial Management and Accounting. Barron's Educational Series.

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