Quark Spy Equipment manufactures espionage equipment.

Quark uses a job-order cost system and

applies overhead to jobs the basis of direct labor-hours. For the current year, Quark estimated that it
would work 100,000 direct labor-hours and incur $20,000,000 of manufacturing overhead cost. The
following summarized information relates to January of the current year. The raw materials purchased
include both direct and indirect materials.

Raw materials purchased on account .............................. $1,412,000

Direct materials requisitioned into production ................ $1,299,500

Indirect materials requisitioned into production ............. $98,000

Direct labor cost (7,900 hours @ $40 per hour) .............. $316,000

Indirect labor cost (10,200 hours @ $16 per hour) ......... $163,200

Depreciation on the factory building ............................... $190,500

Depreciation on the factory equipment ........................... $890,700

Utilities for the factory .................................................... $79,600

Cost of jobs finished ........................................................ $2,494,200

Cost of jobs sold .............................................................. $2,380,000

Sales (all on account) ...................................................... $3,570,000

Required:

Prepare journal entries to record Quark's transactions for the month of January. Do not close out the
manufacturing overhead account

Answer:

Raw Materials ........................................................ 1,412,000

Accounts Payable ......................................... 1,412,000

Work in Process ..................................................... 1,299,500

Manufacturing Overhead ....................................... 98,000

Raw Materials .............................................. 1,397,500

Work in Process ..................................................... 316,000

Manufacturing Overhead ....................................... 163,200

Salaries and Wages Payable (or Cash) ......... 479,200

Work in Process ..................................................... 1,580,000

Manufacturing Overhead ............................. 1,580,000

($20,000,000/100,000) × 7,900

Manufacturing Overhead ....................................... 1,160,800

Accumulated Depreciation, Building ........... 190,500

Accumulated Depreciation, Equipment ....... 890,700

Utilities Payable (or Cash) ........................... 79,600

Finished Goods ...................................................... 2,494,200

Work in Process ........................................... 2,494,200

Cost of Goods Sold................................................ 2,380,000

Finished Goods ............................................ 2,380,000

Accounts Receivable ............................................. 3,570,000

Sales ............................................................. 3,570,000