The Hila Manufacturing Company produces finished product within two days of the receipt of raw materials. Inventory accounts consist of a supplies account for indirect factory materials, a finished goods account, and a combined raw and in process (RIP) inventory account. All conversion costs are charged to the cost of goods sold account. At the end of each month, all inventories are counted, their conversion cost components are estimated, and inventory account balances are adjusted. Raw material cost is backflushed from RIP to Finished Goods and from Finished Goods to Cost of Goods Sold. The following information is a summary of selected transactions and other information for June: Beginning balances in inventory accounts are:
Raw and In Process .......................................... $ 41,600
Finished Goods ............................................... 370,000
Supplies ........................................................ 31,000
The June 1 RIP balance consisted of $40,000 cost of materials, most of which were not yet in process, plus a $1,600 conversion cost estimate assigned to partially processed work. The Finished Goods balance consisted of $190,000 material cost and a $180,000 estimate of conversion cost.
June 30 inventories based on physical count:
Raw and In Process .......................................... $ 47,900
Finished Goods .............................................. 360,000
Supplies ....................................................... 17,000
The June 30 RIP amount consisted of a $46,000 cost of materials, most of which were not yet in process, plus a $19000 Conversion cost estimate assigned to partially processed work. The Finished Goods amount consisted of $182,000 material cost and a $178,000 estimate of conversion cost.
(a) Direct materials received on credit cost $850,000.
(b) Indirect materials used cost $13,000.
(c) Gross payroll of $400,000 is accrued; the payroll is paid.
(d) The payroll distribution was:
Direct labor ................................................. $ 60,000
Indirect factory labor ...................................... 120,000
Marketing salaries .......................................... 130,000
Administrative salaries .................................... 90,000
(e) Factory overhead costs:
Depreciation ................................................... $668,000
Insurance ...................................................... 13,000
(f) Miscellaneous factory overhead costs:
Paid in cash ............................................................. $54,000
On account .............................................................. 29,000
(g) The factory overhead accumulated in the factory overhead control account was expensed to Cost of Goods Sold.
(h) The material cost component of completed work is back flushed from RIP.
(i) The material cost component of work sold is back flushed from Finished Goods.
(j) Ending balances are established in inventory accounts by adjusting their conversion cost components.
Required:
(1) Prepare journal entries based on the preceding information.
(2) Prepare completed T accounts for RIP, Finished Goods, and Cost of Goods Sold.