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

Exercise 3

Assigning Costs to Jobs

The following transactions occurred in January at Tarnsdale Fabricators, a manufacturer of custom tools:

1. Purchased $17,000 of materials.

2. Issued $16,800 in direct materials to the production department.

3. Issued $1,200 of supplies from the materials inventory.

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

5. Returned $2,200 of the materials issued to production in (2) to the material inventory.

6. Direct labor employees earned $31,000, which was paid in cash.

7. Paid $17,200 for miscellaneous items for the manufacturing plant. Accounts Payable was credited.

8. Recognized depreciation on manufacturing plant of $35,000.

9. Applied manufacturing overhead for the month.

Tarnsdale uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $434,000. Estimated overhead for the year was $403,620.

The following balances appeared in the inventory accounts of Tarnsdale Fabricators for January:

	Beginning	Ending
Materials Inventory	?	$12,600
Work-in-Process Inventory	?	10,500
Finished Goods Inventory	$2,600	$ 7,100
Cost of Goods Sold	?	74,500

Required

a. Prepare journal entries to record these 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 23

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.