Answered Essay: Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s

Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s production activities during May 2013 follows.

 

a. Purchased raw materials on credit, $240,000.
b. Paid $129,600 cash for factory wages.
c. Paid $15,750 cash to a computer consultant to reprogram factory equipment.
d. Materials requisitions record use of the following materials for the month.

 

  Job 136 $ 48,500
  Job 137 33,500
  Job 138 19,200
  Job 139 22,600
  Job 140 6,800
  Total direct materials 130,600
  Indirect materials 20,000
  Total materials used $ 150,600

 

e. Time tickets record use of the following labor for the month.

 

  Job 136 $ 12,100
  Job 137 10,500
  Job 138 37,900
  Job 139 39,400
  Job 140 3,200
  Total direct labor 103,100
  Indirect labor 26,500
  Total $ 129,600

 

f. Applied overhead to Jobs 136, 138, and 139.
g. Transferred Jobs 136, 138, and 139 to Finished Goods.
h. Sold Jobs 136 and 138 on credit at a total price of $545,000.
i. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

 

  Depreciation of factory building $ 69,000
  Depreciation of factory equipment 37,000
  Expired factory insurance 11,000
  Accrued property taxes payable 36,500

 

j. Applied overhead at month-end to the Goods in Process (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

1. Prepare a job cost sheet for each job worked on during the month.
2. Prepare journal entries to record the events and transactions a through j.
3. Prepare T-accounts for each of the following general ledger accounts, each of which started the month with a zero balance: Raw Materials Inventory, Goods in Process Inventory, Finished Goods Inventory, Factory Payroll, Factory Overhead, Cost of Goods Sold. Then post the journal entries to these T-accounts and determine the balance of each account

Expert Answer

 

Solution:

1) Preparing a Job Cost Sheet for Each Job Worked on During the Month:

Job 136 Job 137 Job 138 Job 139 Job 140
Materials $48,500 $33,500 $19,200 $22,600 $6,800
Labor $12,100 $10,500 $37,900 $39,400 $3,200
Overhead (200% of Labor) $24,200 $21,000 $75,800 $78,800 $6,400
Total Cost $84,800 $65,000 $132,900 $140,800 $16,400

2) Preparing Journal Entries to Record the Events and Transactions a through j:

Event General journal Debit Credit
a Raw Materials Inventory $240,000
Accounts Payable $240,000
b Factory Payroll $129,600
Cash $129,600
c Factory Overhead $15,750
Cash $15,750
d Goods in process inventory $130,600
Factory overhead $20,000
Raw materials inventory $150,600
e Goods in process inventory $103,100
Factory overhead $26,500
Factory payroll $129,600
f Goods in process inventory $178,800
Factory Overhead $178,800
g Finished Goods Inventory $358,500
Goods in process inventory $358,500
h (1) Accounts Receivable $545,000
Sales $545,000
h (2) Cost of goods sold $217,700
Finished goods inventory $217,700
i Factory Overhead $153,500
Accum. depreciation – Factory building $69,000
Accum. depreciation – Factory equipment $37,000
Prepaid insurance $11,000
Property taxes payable $36,500
j Goods in process inventory $27,400
Factory overhead $27,400

3) Preparing T-Accounts for the Each of the Following General Ledger Accounts:

Raw Materials Inventory
a $240,000
$150,600 d
Ending Balance $89,400
Factory Payroll
b $129,600
$129,600 e
Ending Balance $0
Goods In Process Inventory
d $130,600
e $103,100
f $178,800
$358,500 g
j $27,400
Ending Balance $81,400
Factory Overehead
c $15,750
d $20,000
e $26,500
$178,800 f
i $153,500 $27,400 j
Ending Balance $9,550
Finished Goods Inventory
g $358,500
$217,700 h
Ending Balance $140,800
Cost of Goods Sold
h $217,700
Ending Balance $217,700
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