Blue Plate Construction organized in December and recorded the following transactions during its first month of operations. Dec. 2 Purchased materials on account for $400,000. Dec. 3 Used direct materials costing $100,000 on job no. 100.
Dec. 9 Used direct materials costing $150,000 on job no. 101. Dec. 15 Used direct materials costing $30,000 on job no. 102.
Dec. 28 Applied the following direct labor costs to jobs: job no. 100, $9,000; job no. 101, $11,000; job no. 102, $5,000.
Dec. 28 Applied manufacturing overhead to all jobs at a rate of 300% of direct labor dollars.
Dec. 29 Completed and transferred job no. 100 and job no. 101 to the finished goods warehouse.
Dec. 30 Sold job no. 100 on account for $200,000.
Dec. 31 Recorded and paid actual December manufacturing overhead costs of $78,000, cash.
Dec. 31 Closed the Manufacturing Overhead account directly to Cost of Goods Sold.

Required:
a. Prepare journal entries for each of the above transactions.
b. Compute the amount at which Cost of Goods Sold is reported in the company's income statement for the month ended December 31.
c. Determine the inventory balances reported in the company's balance sheet dated December 31.
d. Was manufacturing overhead in December overapplied, or was it underapplied?

a. Journal entries

Dec. 2

Raw Materials $400,000 (debit)

Accounts Payable $400,000 (credit)

Dec. 3

Work In Process : job no. 100 $100,000 (debit)

Raw Materials $100,000 (credit)

Dec. 9

Work In Process : job no. 101 $150,000 (debit)

Raw Materials $150,000 (credit)

Dec. 15

Work In Process : job no. 102 $30,000 (debit)

Raw Materials $30,000 (credit)

Dec. 28

Work In Process : job no. 100 $9,000 (debit)

Work In Process : job no. 101 $11,000 (debit)

Work In Process : job no. 102 $5,000 (debit)

Salaries Payable $100,000 (credit)

Dec. 28

Work In Process : job no. 100 $27,000 (debit)

Work In Process : job no. 101 $33,000 (debit)

Work In Process : job no. 102 $15,000 (debit)

Overheads $75,000 (credit)

Dec. 29

Finished Goods : job no. 100 $136,000 (debit)

Finished Goods : job no. 101 $194,000 (debit)

Work In Process : job no. 100 $136,000 (credit)

Work In Process : job no. 101 $194,000 (credit)

Dec. 30

Accounts Receivable $200,000 (debit)

Cost of Sales :  job no. 100 $136,000 (debit)

Sales Revenue $200,000 (credit)

Finished Goods : job no. 100 $136,000 (credit)

Dec. 31

Overheads $78,000 (debit)

Cash $78,000 (credit)

Dec. 31

Cost of Sales $3,000 (debit)

Overheads $3,000 (credit)

b. Cost of Goods Sold

Cost of Sales :  job no. 100              $136,000

Add Under - Applied Overheads        $3,000

Cost of Goods Sold                          $139,000

c. inventory balances

Work In Process Balance                 $50,000

Finished Goods Balance                 $194,000

Raw Materials Balance                    $120,000

d. Manufacturing Overheads Application

Manufacturing Overheads were under-applied by $3,000

Explanation:

Raw Materials Balance :

Raw Materials Purchase                $400,000

Less Materials Used

job no. 100                                     ($100,000)

job no. 101                                      ($150,000)

job no. 102                                      ($30,000)

Raw Materials Balance                 $120,000

Work In Process Balance :

Only job no. 102 was yet to be completed

Costs of this job is as follows :

Raw Materials                                   $30,000

Direct Labor                                        $5,000

Overheads                                         $15,000

Work In Process Balance                 $50,000

Finished Goods Balances :

Only Job 101 was completed and yet to be sold

Raw Materials                                   $150,000

Direct Labor                                        $11,000

Overheads                                         $33,000

Finished Goods Balance                 $194,000

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