Information for three different companies follows. Each company applies factory
ID: 2474693 • Letter: I
Question
Information for three different companies follows. Each company applies factory overhead at the rate of 40% of direct labor cost. In each scenario, the following entry was made to record the actual overhead costs:
Prepare a compound journal entry for each company to transfer raw materials to production, record direct labor costs on each job, and apply overhead at the predetermined rate. If the scenario involves underapplied or overapplied overhead, prepare an additional journal entry to transfer the amount to Cost of Goods Sold.
Company A Raw materials transferred to production totaled $100,000, and direct labor cost was $212,500.
Company B Raw materials transferred to production totaled $110,000, and direct labor cost was $200,000.
Company C Raw materials transferred to production totaled $90,000, and direct labor cost was $225,000.
Factory Overhead 85,000 Salaries Payable 50,000 Utilities Payable 15,000 Supplies 4,000 Accumulated Depreciation 16,000Explanation / Answer
GENERAL JOURNAL Date Accounts Debit Credit A Work in process 100,000 Factory overhead 85,000 Raw material Inventory 185,000 To record costs and apply overhead at the predetermined rate ($212,500 X 40% = $85,000) B Work in process 110,000 Factory overhead 80,000 Raw material Inventory 190,000 To record costs and apply overhead at the predetermined rate ($200,000 X 40% = $80,000) C Work in process 90,000 Factory overhead 90,000 Raw material Inventory 180,000 To record costs and apply overhead at the predetermined rate ($225,000 X 40% = $90,000)