4-25 Journal entries, T-accounts, and source documents. Creation Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2014: Je, 37, 38 Costs incurred: Purchases of direct materials (net) on credit Direct manufacturing labor cost Indirect labor Depreciation, factory equipment Depreciation, office equipment Maintenance, factory equipment Miscellaneous factory overhead Rent, factory building Advertising expense Sales commissions Inventories: $122,000 83,000 54,000 32,000 7,900 29,000 9,900 78,000 94,000 33,000 Direct materials Work in process Finished goods January 1, 2014 $ 9,800 6,300 68,000 December 31, 2014 $13,000 23.000 27,000 ASSIGNMENT MA Rei Creation Co. uses a normal-costing system and allocates overhead to work in process at a rate of $2.60 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials. 1. Prepare journal entries to record the transactions for 2014 including an entry to close out over- or underallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be refer- enced as backup for the entry. 2. Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account