ACCT Chapter 3
Cost of goods sold =
Beg Fin Goods + COGM - End Fin Goods
Cost of Direct Materials =
Beg Inv + Purchases - Indirect Materials - Ending Inv
Raw materials used in production =
Beg raw materials inventory + Purchases of raw materials - End raw materials inventory
Finished Goods Dr
COGM
WIP Cr
COGM
COGS Dr
COGS
Finished Goods Cr
COGS
Raw Materials Dr
Cost of Materials Purchased
Total Manufacturing Costs =
DM + DL + MO applied to WIP
Raw Materials Cr
Direct Materials added to WIP Indirect Materials added to MOVHD
Record a sale (JE)
Dr Accounts Receivable Cr Sales Dr COGS Cr Finished Goods (units sold x price per unit)
Completed jobs are transferred from where to where?
Dr Finished Goods Cr WIP
Manufacturing overhead is underapplied if
actual overhead is greater than applied
Finished goods consist of
completed, unsold goods
Cost of goods manufactured is the
sum of all jobs transferred from WIP to Finished goods (Cr of WIP to Dr of Finished Goods)
Under/Overapplied in JE
1. Dr COGS Cr MOVHD 2. Dr WIP Dr Finished Goods Dr COGS Cr MOVHD (#2 is more accurate)
Calculating if overhead is under/overapplied
1. Find predetermined overhead rate 2. Predetermined OVHD Rate x Allocation base = MOVHD Applied 3. Actual MOVHD - Applied MOVHD
Manufacturing overhead debit side represents
Actual Manufacturing Overhead Indirect Materials cost
Work in process consists of
Actual direct labor cost Actual direct materials cost Applied Manufacturing Overhead
MOVHD Dr
Actual overhead costs incurred (underapplied)
Manufacturing overhead credit side represents
Applied Manufacturing Overhead
MOVHD Cr
Applied overhead costs in WIP (overapplied)
Salaries and Wages Payable Cr
Direct labor added to WIP Indirect labor added to MOVHD
WIP Dr
Direct materials, direct labor, and manufacturing overhead applied
Nonmanufacturing cost of Office Equipment Depreciation (JE)
Dr Depreciation Expense Cr Accumulated Depreciation
Incomplete jobs at the end of the month (JE)
Dr Finished Goods Cr WIP
Manufacturing Overhead incurred and used (JE)
Dr MOVHD Cr Accounts Payable
Depreciation on factory equipment
Dr MOVHD Cr Accumulated Depreciation
Taxes and Prepaid insurance for Manufacturing Overhead (JE)
Dr MOVHD Cr Property Taxes Payable Cr Prepaid Insurance
Purchase of materials (JE)
Dr Raw Materials Inventory Cr Accounts Payable
Nonmanufacturing cost of administrative salaries (JE)
Dr Salaries Expense Cr Salaries and Wages Payable
Administrative Salaries (JE)
Dr Salaries Expense Cr Wages Payable
Application of Manufacturing Overhead (JE)
Dr WIP Cr MOVHD
A company requisitioned $40,000 in direct materials and $30,000 in indirect materials from the storeroom to be used in production. The journal entry to record this transaction would
Dr WIP $40,000 Dr MOVHD $30,000 Cr Raw Material Inventory $70,000
Direct and Indirect use of Materials (JE)
Dr WIP (Direct) Dr MOVHD (Indirect) Cr Raw Materials
Direct and Indirect use of Labor (JE)
Dr WIP (Direct) Dr MOVHD (Indirect) Cr Salaries and Wages Payable
Unadjusted cost of goods sold =
beg finished goods inventory + cost of goods manufactured - end finished goods inventory
Selling and administrative costs incurred are treated as
period expenses
Cost of goods manufactured =
total manufacturing costs + beg work in process inventory - end work in process inventory
