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August 2010 Accounting Transactions Summary

Latourneau Company had raw material inventory of $20,300, work in process inventory of $7,000, and finished goods inventory of $18,000 as of August 1, 2010. During August, the company purchased $164,000 of raw materials, incurred $88,000 of factory payroll costs including $62,000 of direct labor, and accrued $7,000 of utility costs including $1,600 of fixed costs. The company transferred $320,000 of costs to finished goods inventory, recorded $700,000 of sales including $550,000 of account sales, and recorded $330,000 of cost of goods sold.

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Luz De Castro Dueñas
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53 views5 pages

August 2010 Accounting Transactions Summary

Latourneau Company had raw material inventory of $20,300, work in process inventory of $7,000, and finished goods inventory of $18,000 as of August 1, 2010. During August, the company purchased $164,000 of raw materials, incurred $88,000 of factory payroll costs including $62,000 of direct labor, and accrued $7,000 of utility costs including $1,600 of fixed costs. The company transferred $320,000 of costs to finished goods inventory, recorded $700,000 of sales including $550,000 of account sales, and recorded $330,000 of cost of goods sold.

Uploaded by

Luz De Castro Dueñas
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

Latourneau Company had the following account balances as of August 1, 2010:

Raw Material (direct and indirect) Inventory $20,300


Work in Process Inventory 7,000
Finished Goods Inventory 18,000

During August, the company incurred the following factory costs:


1. Purchased $164,000 of raw material on account.
2. Issued $180,000 of raw material to production, of which $134,000 was for direct
materials.
3. Accrued $88,000 in factory payroll costs; $62,000 was for direct labor and the rest was
for supervisors’ salaries.
4. Accrued $7,000 of utility costs; of this amount, $1,600 was fi xed.
5. Accrued $2,000 of property taxes on the factory.
6. Recorded the expiration of $1,600 of prepaid insurance on factory equipment.
7. Recorded $40,000 of straight-line depreciation on factory equipment.
8. Applied actual overhead to Work in Process Inventory.
9. Transferred goods costing $320,000 to Finished Goods Inventory.
10. Recorded total sales of $700,000; of these, $550,000 were on account.
11. Recorded cost of goods sold of $330,000.
12. Recorded selling and administrative costs of $280,000 (credit “Various accounts”).
Required:
a. Journalize the transactions for August.
b. Post transactions to T-accounts for Raw Material Inventory, Work in Process
Inven tory, Finished Goods Inventory, and Cost of Goods Sold.
c. Prepare a schedule of cost of goods manufactured for August using actual costing.
d. Prepare an income statement, including a detailed schedule of cost of goods sold.
Solution to Demonstration Problem
a. (1) Raw Material Inventory 164,000
Accounts Payable 164,000
To record raw material purchased on account

(2) Work in Process Inventory 134,000


Variable Overhead Control 46,000
Raw Material Inventory 180,000
To transfer direct and indirect materials to production

(3) Work in Process Inventory 62,000


Fixed Overhead Control 26,000
Salaries and Wages Payable 88,000
To accrue factory wages and salaries

(4) Variable Overhead Control 5,400


Fixed Overhead Control 1,600
Utilities Payable 7,000
To accrue factory utility expenses

(5) Fixed Overhead Control 2,000


Property Taxes Payable 2,000
To accrue property tax
(6) Fixed Overhead Control 1,600
Prepaid Insurance 1,600
To record expired insurance on factory equipment
(7) Fixed Overhead Control 40,000
Accumulated Depreciation—Factory Equipment 40,000
To record depreciation on factory equipment
(8) Work in Process Inventory 122,600
Variable Overhead Control 51,400
Fixed Overhead Control 71,200
To assign actual overhead to WIP Inventory

(9) Finished Goods Inventory 320,000


Work in Process Inventory 320,000
To record cost of goods manufactured
(10) Accounts Receivable 550,000
Cash 150,000
Sales 700,000
To record sales on account and for cash

(11) Cost of Goods Sold 330,000


Finished Goods Inventory 330,000
To record cost of goods sold for the period

(12) Selling & Administrative Expenses 280,000


Various accounts 280,000
To record selling and administrative expenses

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