Q30E - Horngren'S Financial And Managerial Accounting

Question

Blue Ridge Mountain Manufacturing had the following transactions related to manufacturing overhead for the year:

1. Incurred manufacturing overhead costs

a. \(5,000 in indirect materials

b. \)12,500 in indirect labor (credit Wages Payable)

c. \(30,600 in machinery depreciation

d. \)20,400 in other indirect costs that were paid in cash

2. Allocated manufacturing overhead (use a compound entry)

a. \(30,000 to the Mixing Department

b. \)37,000 to the Packaging Department

Requirements

1. Prepare the journal entries for Blue Ridge Mountain Manufacturing.

2. Determine the amount of overallocated or underallocated manufacturing overhead by posting the transactions to the Manufacturing Overhead account. Assume the balance in Manufacturing Overhead on January 1 is $0. Prepare the adjusting entry.

Step-by-Step Solution

Answer

1. The journal entries to record the transaction undertaken in Blue Ridge Mountain manufacturing are shown in step 2.

2. The manufacturing overhead is under allocated by the amount of $1,500. The adjusting entry is shown below:

Date	Particulars	Debit ($)	Credit ($)
	Cost of goods sold	1,500
	Manufacturing overhead		1,500

Step-by-Step Solution: Step 1: Manufacturing Overhead

Manufacturing overhead is the total of all the expenses indirectly incurred by the company for producing the products. It does not include the direct cost.

Step 2: Journal entries to record the transactions

Date	Particulars	Debit ($)	Credit ($)
1.a.	Manufacturing overhead	5,000
	Raw material		5,000
1.b.	Manufacturing overhead	12,500
	Wages payable		12,500
1.c.	Manufacturing overhead	30,600
	Accumulated depreciation		30,600
1.d.	Manufacturing overhead	20,400
	Cash		20,400
2.	Work-in-process inventory-Mixing department	30,000
	Work-in-process inventory-Packaging department	37,000
	Manufacturing overhead		67,000

 

Step 3: Manufacturing overhead account

Particulars	Amount ($)	Particulars	Amount ($)
Raw material	5,000	Allocated overhead	67,000
Wages payable	12,500	Work-in-process inventory	1,500
Accumulated depreciation	30,600
Cash	20,400