Prepare journal entries to record the transactions for 2011 including an entry to close out over- or… 2 answers below »

Journal entries, T-accounts, and source documents. Production Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2011:

Costs incurred:

Purchases of direct materials (net) on credit

$124,000

Direct manufacturing labor cost

80,000

Indirect labor

54,500

Depreciation, factory equipment

30,000

Depreciation, office equipment

7,000

Maintenance, factory equipment

20,000

Miscellaneous factory overhead

9,500

Rent, factory building

70,000

Advertising expense

90,000

Sales commissions

30,000

Inventories:

January 1, 2011

December 31, 2011

Direct materials

$ 9,000

$11,000

Work in process

6,000

21,000

Finished goods

69,000

24,000

Production Co. uses a normal costing system and allocates overhead to work in process at a rate of $2.50 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials.

1. Prepare journal entries to record the transactions for 2011 including an entry to close out over- or underallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be referenced as backup for the entry.

2. Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account.

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