Comprehensive accounting for manufacturing transactions

School Stars produces stars for elementary teachers to reward their students. School Stars’ trial balance on June 1 follows:

SCHOOL STARS Trial Balance June 1, 2012
Â	Balance
Account Title	Debit	Credit
Cash	$ 17,000	Â
Accounts receivable	170,000	Â
Inventories:	Â	Â
Materials	6,200	Â
Work in process	43,000	Â
Finished goods	21,300	Â
Plant assets	250,000	Â
Accumulated depreciation	Â	$ 71,000
Accounts payable	Â	133,000
Wages payable	Â	3,300
Common stock	Â	144,000
Retained earnings	Â	156,200
Sales revenue	—	—
Cost of goods sold	—	Â
Manufacturing overhead	—	Â
Marketing and general expenses	—	Â
Total	$ 507,500	$ 507,500

June 1 balances in the subsidiary ledgers were as follows:

• Materials subledger: $4,300 paper and $1,900 indirect materials
• Work in process subledger: Job 120 $43,000; $0 for Job 121
• Finished goods subledger: $9,300 Large Stars and $12,000 Small Stars

June transactions are summarized as follows:

a. Collections on account, $155,000.

b. Marketing and general expenses incurred and paid, $22,000.

c. Payments on account, $37,000.

d. Materials purchases on credit: Paper, $26,600; indirect materials, $4,200.

e. Materials used in production (requisitioned):

• Job 120: Paper, $900

• Job 121: Paper, $7,850

• Indirect materials, $1,600

f. Wages incurred and assigned during June, $43,000. Labor time records for the month: Job 120, $4,800; Job 121, $18,500; indirect labor, $19,700.

g. Wages paid in June include the balance in the Wages payable account at May 31 and $39,900 of wages incurred during June.

h. Depreciation on plant and equipment, $2,700.

i. Manufacturing overhead was allocated at the predetermined rate of 90% of direct labor cost.

j. Jobs completed during the month: Job 120, 600,000 Large Stars at total cost of $53,020.

k. Credit sales on account: all of Job 120 for $133,000.

l. Closed the Manufacturing overhead account to Cost of goods sold.

Requirements

1. Journalize the transactions for the company. School uses a perpetual inventory system.

2. Open T-accounts for the general ledger, the Materials ledger, the Work in process ledger, and the Finished goods ledger. Insert each account balance as given, and use the reference Bal. Post the journal entries to the T-accounts using the transaction letters as a reference.

3. Prepare a trial balance at June 30, 2012.

4. Use the Work in process inventory T-account to prepare a schedule of cost of goods manufactured for the month of June. (You may want to review Exhibit 16-10.)

5. Prepare an income statement for the month of June. To calculate cost of goods sold, you may want to review Exhibit 16-7. (Hint: In transaction l, you closed any under/overallocated manufacturing overhead to Cost of goods sold. In the income statement, show this correction as an adjustment to Cost of goods sold. If manufacturing overhead is underallocated, the adjustment will increase Cost of goods sold. If overhead is overallocated, the adjustment will decrease Cost of goods sold.)