The Polaris Company uses a job-order costing system. The following transactions occurred in October: Raw materials purchased on account, $210,000. Raw materials used in production, $189,000 ($151,200 direct materials and $37,800 indirect materials). Accrued direct labor cost of $50,000 and indirect labor cost of $22,000. Depreciation recorded on factory equipment, $106,000. Other manufacturing overhead costs accrued during October, $130,000. The company applies manufacturing overhead cost to production using a predetermined rate of $9 per machine-hour. A total of 76,300 machine-hours were used in October. Jobs costing $514,000 according to their job cost sheets were completed during October and transferred to Finished Goods. Jobs that had cost $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 36% above cost. Required: 1. Prepare journal entries to record the transactions given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $36,000.

Required 1.

J1

Raw Materials $210,000 (debit)

Accounts Payable $210,000 (credit)

J2

Work In Process : Direct Materials $151,200 (debit)

Work In Process : Indirect Materials $37,800 (debit)

Raw Materials $189,000 (credit)

J3

Work In Process : Direct Labor $50,000 (debit)

Work In Process : Indirect Labor $22,000 (debit)

Salaries and Wages Payable $72,000 (credit)

J4

Work In Process : Depreciation $106,000 (debit)

Accumulated Depreciation $106,000 (credit)

J5

Overheads  $130,000 (credit)

Cash  $130,000 (debit)

J6

Work In Process $686,700 (debit)

Overheads $686,700 (credit)

J7

Finished Goods $514,000 (debit)

Work In Process $514,000 (credit)

J8

Cost of Goods Sold $450,000 (debit)

Finished Goods $450,000 (credit)

J9

Accounts Receivables $612,000 (debit)

Sales Revenue $612,000 (credit)

Required 2.

Manufacturing Overhead T - Account

Debit

Indirect Materials                           $37,800

Indirect Labor                                $22,000

Depreciation                                $106,000

Other Overheads                        $130,000

Over-applied (balancing figure) $390,900

Totals                                           $686,700

Credit

Work In Process                          $686,700

Totals                                           $686,700

Work in Process T - Account

Debit

Opening Balance                                 $36,000

Direct Materials                                   $151,200

Direct Labor                                         $50,000

Overheads                                         $686,700

Totals                                                 $923,900

Credit

Finished Goods                                 $450,000

Closing Balance (Balancing figure)  $473,900

Totals                                                 $923,900

Explanation:

Manufacturing costs accumulate in the Work In Process Account.

Note that only applied overheads are included in Work In Process Account.

Cost of Finished Goods are removed from Work In Process Account and recognized in the Finished Goods Account

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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