Question

Cline Manufacturing Company uses a job order system and maintains perpetual inventory records.

Answer 1

Answer:

1. Raw materials were purchased on account.

Debit Raw Materials Inventory.

Credit Accounts Payable.

Inventory was bought in credit so Payable is owed.

2. Issued a check to Dixon Machine Shop for repair work on factory equipment.

Debit Manufacturing Overhead

Credit Cash

Cash was used to pay for Indirect production work. Cash reduces Sonia credited.

3. Direct materials were requisitioned for Job 280.

Debit Work in Progress Inventory

Credit Raw Material Inventory

Transferred from Raw Materials so work may be done.

4. Factory labor was paid as incurred.

Debit Factory Labor

Credit Cash

Cash reduces again so is credited. Factory Labor is Expense that should be debited.

5. Recognized direct labor and indirect labor used.

Debit Work in Progress Inventory

Debit Manufacturing Overhead

Credit Factory Labor

Direct Labor falls under Work in Progress and Indirect Labor falls under Manufacturing Overhead.

6. The production department requisitioned indirect materials for use in the factory.

Debit Manufacturing Overhead

Credit Raw Materials Inventory

Indirect materials are an overhead.

7. Overhead was applied to production based on a predetermined overhead rate of $8 per labor hour.

Debit Work in Progress Inventory  

Credit Manufacturing Overhead

8. Goods that were completed were transferred to finished goods.

Debit Finished Goods

Credit Work in Progress Inventory

9. Goods costing $80,000 were sold for $105,000 on account.

Debit Cost of Goods Sold

Credit Inventory

Then,

Debit Accounts Receivable

Credit Sales

10. Paid for raw materials purchased previously on account.

Debit Accounts Payable

Credit Cash