10 Jan Cost Accounting Cycle Entries in T Accounts. At th
Cost Accounting Cycle Entries in T Accounts. At the beginning of October, the ledger of the Highlander Company contained (among other accounts) the following: Materials, $35,000; Work in Process, $40,000; Finished Goods, $25,000. During October the following transactions were completed (a) Materials were purchased on account at a cost of $18,500. (b) Materials in the amount of $22,000 were issued from the storeroom for use in production. (c) Requisitions for indirect factory materials and supplies amounted to $2,000. (d) The total payroll for the month was $35,000 including salesmen's salaries of $5,000 and office salaries of $5,000. Labor time tickets show that $20,000 of the payroll was direct labor. Income taxes were withheld at the rate of 10% of wages earned, and employees' FICA taxes of $1,440 were deducted. The payroll due the employees was paid during the month. (e) The employer's payroll taxes consist of $1,440 FICA, 1.4% state unemployment insurance, and .5% federal unemployment insurance tax. Two hundred and seventy dollars of the taxes apply to salesmen's salaries and $180 to office salaries. (f) Sundry manufacturing expenses requiring an outlay of $10,000 were paid. (g) Factory overhead of 90% of the direct labor cost is charged to production, (h) Cost of production completed for the month totaled $75,000, and finished goods in the shipping room at the end of October totaled $10,000. (i) Customers were billed for $122,000 for shipments made during October. (j) Customers paid $68,000 on account. Required: (1) Record in T accounts the transactions for October using one work in process account. (2) Close the income statement accounts to Income Summary. Close underapplied factory overhead to Cost of Goods Sold.