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

Exercise 30

Reconstruct Missing Data

A tornado struck the only manufacturing plant of Toledo Farm Implements (TFI) on June 1. All work-in-process inventory was destroyed, but a few records were salvaged from the wreckage and from the company’s headquarters. If acceptable documentation is provided, the loss will be covered by insurance. The insurable value of work-in-process inventory consists of direct materials, direct labor, and applied overhead.

The following information about the plant appears on the April financial statements at the company’s downtown headquarters:

Materials inventory, April 30	$ 98,000
Work-in-process inventory, April 30	172,400
Finished goods inventory, April 30	64,000
Cost of goods sold through April 30	697,200
Accounts payable (materials suppliers), April 30	43,200
Manufacturing overhead through April 30	369,800
Payroll payable, April 30	–0–
Withholding and other payroll liabilities, April 30	19,400
Overhead applied through April 30	359,200

A count of the inventories on hand May 31 shows the following:

Materials inventory	$86,000
Work-in-process inventory	?
Finished goods inventory	75,000

The accounts payable clerk tells you that outstanding bills to suppliers totaled $100,200 and that cash payments of $75,800 were made to them during the month. She informs you that the payroll costs last month for the manufacturing section included $164,800, of which $29,400 was indirect labor.

At the end of May, the following balances were available from the main office:

Manufacturing Overhead through May 31	$434,000
Cost of Goods Sold through May 31	793,200

Recall that each month there is only one requisition for indirect materials. Among the fragments of paper, you located the following information, which you have neatly typed for your records:

From scrap found under desk: indirect materials ? $4,172

You also learn that the overhead during the month was overapplied by $2,400.

Required

Determine the cost of the work-in-process inventory lost in the disaster.

Step 1 of 4

Cost of the work in process inventory lost in disaster is calculated as under:

Material Purchased during the year is $100,000 as the balance in accounts payable is $132,800 which is for the material purchase.

Accounts payable
Date	Particulars	Amount	Date	Particulars	Amount
	Payment	75,800	BB (5/1)	Opening	43,200
				Purchased	132,800
EB		100,200

Materials Inventory
Date	Particulars	Amount	Date	Particulars	Amount
BB (5/1)	Opening	98,000
	Purchased (a)	132,800		Issued to WIP	140,628
				Issued to manufacturing Control	4,172
EB		86,000