Exercise 15-6 Recording events in job order costing LO P1, P2, P3, P4 Prepare summary journal entries to record the following transactions for a company in its first month of operations. Raw materials purchased on account, $94,000. Direct materials used in production, $40,500. Indirect materials used in production, $25,000. Paid cash for factory payroll, $70,000. Of this total, $50,000 is for direct labor and $20,000 is for indirect labor. Paid cash for other actual overhead costs, $7,875. Applied overhead at the rate of 125% of direct labor cost. Transferred cost of jobs completed to finished goods, $74,000. Sold jobs on account for $105,000 g(2). The jobs had a cost of $74,000 g(1).

The journal entries are shown below:

Explanation:

The journal entries are as follows

a.  Raw materials A/c Dr $94,000

             To Accounts payable A/c  $94,000

(Being the raw material is purchased on account is recorded)

b.  Work in process inventory  Dr $40,500

   Factory overhead  Dr $25,000

             To Raw material  $65,500

(Being the raw material is recorded)

c.  Work in process Dr $50,000

     Factory overhead Dr$20,000

                       To cash $70,000

(Being the cash is paid is recorded)

d.  Factory overhead Dr$7,875

           To Cash $7,875

(Being cash is paid is recorded)

e.   Work in process Dr $62,500 ($50,000 × 125%)

            To factory overhead $62,500

(Being the applied overhead is recorded)

f.   Finished goods Dr $74,000

             To work in process $74,000

(Being the transferred goods is recorded)

g.  Accounts receivables Dr$105,000

           To sale $105,000

(Being the sales revenue is recorded)

g. 1 Cost of goods sold Dr $74,000

             To finished goods $74,000

(Being the cost is recorded)