Danielle Ltd is working on two job orders. The job cost sheets show the following: direct materials —
Job 120 \($6000,\) Job 121 \($3600;\) direct labour — Job 120 \($4000,\) Job 121 \($2000;\) and manufacturing overhead—Job 120 \($5000,\) Job 121 \($2500.\) Prepare the three summary entries to record the assignment of costs to work in process from the data on the job cost sheets.
Reasoning
Each cost charged to a job must be accompanied by a debit to the control account, work in process inventory. The credits in the summary entries are the accounts debited when the manufacturing costs were accumulated. The manufacturing overhead costs are accumulated in the manufacturing overhead account and, when applied/assigned to jobs, a contra account (manufacturing overhead applied) is credited. At the end of the period, these two accounts are offset and the balance is transferred to cost of sales.