The following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year. Manufacturing Overhead (a) 486,144 (b) 405,120 Bal. 81,024 Work in Process Bal. 10,880 (c) 754,000 298,500 90,500 (b) 405,120 Bal. 51,000 Finished Goods Bal. 39,000 (d) 662,000 (c) 754,000 Bal. 131,000 Cost of Goods Sold (d) 662,000 The overhead that had been applied to production during the year is distributed among Work in Process, Finished Goods, and Cost of Goods Sold as of the end of the year as follows: Work in Process, ending $ 24,480 Finished Goods, ending 62,880 Cost of Goods Sold 317,760 Overhead applied $ 405,120 For example, of the $51,000 ending balance in work in process, $24,480 was overhead that had been applied during the year. Required: 1. Identify reasons for entries (a) through (d). 2. Assume that the underapplied or overapplied overhead is closed to Cost of Goods Sold. Prepare the necessary journal entry. 3. Assume that the underapplied or overapplied overhead is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the necessary journal entry.

Answer and Explanation:

As per the data given in the question,

1.

a) Cost of goods manufactured.

b) Cost of goods sold.

c) Overhead cost applied to work in process

d) Actual manufacturing overhead cost.

2. Journal Entry

Manufacturing overhead A/c Dr. 81,024

To cost of goods sold A/c. 81,024

3.

Work in process ending $24,480 =6.04%

Finished goods ending $62,880 =15.52%

Cost of goods sold $317,760 =78.44%

Total cost $405.120 =100%

To calculate overhead allocation :

Work in process ending = ($81,024× 6.04%) =$4,894

Finished goods ending = ($81,024 × 15.52%) =$12,575

Cost of goods sold = ($81,024 × 78.44%) = $63,355

Total cost = $81,024

Journal Entry

Manufacturing overhead A/c Dr. 81,024

To work in process A/c. $4,893

To finished goods A/c. $12,575

To cost of goods sold A/c. $63,555