The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system. April 30 May 31
Inventories
Raw materials $43,000 $52,000
Work in process 10,200 21,300
Finished goods 63,000 35,600
Activities and information for May
Raw materials purchases (paid with cash) 210,000
Factory payroll (paid with cash) 345,000
Factory overhead
Indirect materials 15,000
Indirect labor 80,000
Other overhead costs 120,000
Sales (received in cash) 1,400,000
Predetermined overhead rate based on direct labor cost 70%

Requried:
a. Journal entries for materials.
b. Journal entries for labor

a. Journal entries for materials.

Raw materials purchases

Raw Materials 210,000 (debit)

Cash 210,000 (credit)

Raw Materials usage

Work - In Process : Direct Materials $186,000 (debit)

Work - In Process : Indirect Materials $15,000 (debit)

Raw Materials $210,000 (credit)

b. Journal entries for labor

Work - In Process : Direct Labor $265,000 (debit)

Work - In Process : Indirect Labor $80,000 (debit)

Cash $345,000 (credit)

Explanation:

Raw Materials T - Account (Determination of Raw Materials used in Production)

Debit

Opening Raw Materials    $43,000

Purchases                        $210,000

Total                                $253,000

Credit

Closing  Raw Materials    $52,000

Used In Production         $201,000

Total                                $253,000

Thus, Work - In Process : Direct Materials = $201,000 - $15,000 = $186,000

Determination of Direct Labor Cost

Factory payroll        $345,000

Less Indirect labor  ($80,000)

Direct labor             $265,000

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