Sunset Products manufactures skateboards. The following transactions occurred in March.

Purchased $30,000 of materials on account.
Issued $1,500 of supplies from the materials inventory.
Purchased $37,500 of materials on account.
Paid for the materials purchased in transaction (1) using cash.
Issued $45,000 in direct materials to the production department.
Incurred direct labor costs of $37,500, which were credited to Wages Payable.
Paid $42,250 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop.
Applied overhead on the basis of 140 percent of direct labor costs.
Recognized depreciation on manufacturing property, plant, and equipment of $7,500.

The following balances appeared in the accounts of Sunset Products for March:

Beginning Ending
Materials Inventory $13,500 ?
Work-in-Process Inventory 24,750 ?
Finished Goods Inventory 97,500 $54,750
Cost of Goods Sold 120,000

Required:

a. Prepare journal entries to record the transactions.

Purchased $30,000 of materials on account.

Materials $30,000 (debit)

Trade Payable $30,000 (credit)

Issued $1,500 of supplies from the materials inventory.

Manufacturing Account $ 1,500 (debit)

Materials $ 1,500 (credit)

Purchased $37,500 of materials on account.

Materials $37,500 (debit)

Trade Payable $37,500  (credit)

Paid for the materials purchased in transaction (1) using cash.

Trade Payable $30,000 (debit)

Cash $37,500 (credit)

Issued $45,000 in direct materials to the production department.

Manufacturing Account $45,000 (debit)

Materials Account $45,000 (credit)

Incurred direct labor costs of $37,500, which were credited to Wages Payable.

Manufacturing Account $37,500 (debit)

Wages Payable $37,500 (credit)

Paid $42,250 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop.

Manufacturing Overheads $ 42,250 (debit)

Cash $ 42,250 (credit)

Applied overhead on the basis of 140 percent of direct labor costs.

Manufacturing overheads $ 10,250 (debit)

Cost of Goods Sold $10250 (credit)

Recognized depreciation on manufacturing property, plant, and equipment of $7,500

Manufacturing Overhead - depreciation $ 7,500 (debit)

Accumulated Depreciation $ 7,500 (credit)

Explanation:

Purchased $30,000 of materials on account.

Recognise an Asset - Materials and Recognise a Liability - Trade Payable

Issued $1,500 of supplies from the materials inventory.

De-reconise an Asset - Materials and Recognise cost of manufacturing - Manufacturing Account.

Purchased $37,500 of materials on account.

Recognise an Asset - Materials and Recognise a Liability - Trade Payable

Paid for the materials purchased in transaction (1) using cash.

De-recognise Liability - Trade Payable and De-recognise asset - Cash

Issued $45,000 in direct materials to the production department.

De-recognise Asset - Materials and recognise Manufacturing cost - Manufacturing Account

Incurred direct labor costs of $37,500, which were credited to Wages Payable.

Recognise the Liability Wages Payable and a Manufacturing Cost - Salaries and Wages

Paid $42,250 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop.

Recognise Overhead expenses in Manufacturing Accounts and De-recognise Asset - Cash

Applied overhead on the basis of 140 percent of direct labor costs.

Adjast overapplied manufacturing overheads to cost of goods sold

Recognized depreciation on manufacturing property, plant, and equipment of $7,500

Recognise an overhead expense and de-recognise asset through Accumulated depreciation

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