Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 1

Assigning Costs to Jobs

The following transactions occurred in October at Pawnee Workshops, a custom manufacturer of furniture:

1. Purchased $16,000 of materials.

2. Issued $800 of supplies from the materials inventory.

3. Purchased $11,200 of materials.

4. Paid for the materials purchased in transaction (1).

5. Issued $13,600 in direct materials to the production department.

6. Incurred direct labor costs of $20,000, which were credited to Wages Payable.

7. Paid $21,200 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant.

8. Applied overhead on the basis of 125 percent of $20,000 direct labor costs.

9. Recognized depreciation on manufacturing property, plant, and equipment of $10,000.

The following balances appeared in the accounts of Pawnee Workshops for October:

	Beginning	Ending
Materials Inventory	$29,640
Work-in-Process Inventory	6,600
Finished Goods Inventory	33,200	$28,640
Cost of Goods Sold		52,680

Required

a. Prepare journal entries to record the transactions.

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b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

Step 1 of 22

Journal entries:

Journal entry records the accounting transactions of a business in a journal book. All the business transactions are recorded in the chronological order using the double entry system of accounting.