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The McMahon Construction Company builds bridges. In September and October 20XX, the company worked on a bridge covering the Kleinfeld River in Northern Montana. The McMahon Company has two departments, the Precast Department and the Construction Department. The Precast Department is responsible for building structural elements of bridges in temporary locations (plants) located near the construction sites. The Construction Department operates at the bridge site and they are responsible for assembling the precast structural elements. The estimated costs for Kleinfeld River Bridge for the Precast Department were $ 1,750,000 for direct materials, $ 240,000 for direct labor, and $300,000 for overhead. The estimated costs for the Construction Department regarding the Kleinfeld River Bridge were $ 400,000 for direct materials, $ 180,000 for direct labor, and $ 260,000 for overhead. Overhead is applied on the last day of the month. The Overhead application rate for the Precast Department is $ 30 per direct labor hour. The Overhead application for the Construction Department is 150 percent of direct labor cost.

Transactions for September

Sept 1- Purchased $ 1,170,000 of material on account for the Precast Department to start the building of structural elements. All of the material was issued to production, of the issuance amount, $ 720,000 is considered direct material.
Sept 4- Installed utilities at bridge site at a total cost of $30,000. The amount will be paid later in the month. (Transaction applies to Construction Department)
Sept 6-Paid rent for the temporary construction site housing the Precast Department, $ 7,200.
Sept 15- Completed the bridge support pillars by the Precast Department and transfer everything to the construction site.
Sept 19- Paid machine rental expense of $ 65,000 incurred by the Construction Department for clearing the bridge site and digging the foundations for bridge supports.
Sept 23- Purchased additional materials costing $1,510,000 on account.
Sept 30-The company paid the bills for the Precast Department: utilities, $ 7,200; direct labor, $50,000; insurance, $ 6,700, indirect labor, $ 8,200. Departmental depreciation was recorded, $21,500.
Sept 30-The company paid the bills for the Construction Department: utilities, $ 2,600; direct labor, $19,500; indirect labor, $6,100; and insurance, $ 2,500. Department depreciation was recorded on equipment, $ 9,450. Sept 30- Issued a check to pay for the material purchased on Sept 1 and Sept 23. Sept 30-Applied overhead to production in each department; 6,400 machine hours were worked in the Precast Department for September. Note: Direct Labor Costs for the Construction Department were $19,500.

Transactions for October

Oct 1- Transferred additional structural elements from the Precast Department to the construction site. The construction department incurred an expense of $ 7,000 to rent a crane.
Oct 4- Issued $1,010,000 of material to the Precast Department. Of this amount, $860,000 was considered direct.
Oct 7- Paid rent of cash of $ 7,500 in cash for the temporary site that is occupied by the Precast Department.
Oct 12-Issued $ 390,000 of material to the Construction Department. Of this amount, $ 220,000 was considered direct.
Oct 15-Transferred additional structural elements from the Precast Department to the construction site.
Oct 25-Transferred the final batch of structural elements from the Precast Department to the construction site.
Oct 29-Completed the bridge.
Oct 31-Paid the final bills for the month in the Precast Department: utilities, $ 14,000; direct labor, $120,000; insurance, $10,200; indirect labor, $18,300. Department depreciation was recorded, $21,500.
Oct 31-Paid the final bills for the month in the Construction Department: utilities, $ 5,300; direct labor, $144,500; indirect labor, $19,200; and insurance, $ 7,400. Depreciation was recorded on equipment was $9,450.
Oct 31-Applied overhead in each department. The precast department recorded 4,120 machine hours in October.
Oct 31-Billed the state of Montana for the completed bridge at the contract price of $3,850,000.
Oct 31-Please record the cost of the completed jobs to Finished Goods Inventory.

Required:
Journalize the entries for the preceding transactions. For purposes of this case study it is not necessary to transfer direct material and direct labor from one department to another.

Respuesta :

anthougo

Answer:

The McMahon Construction Company

Journal Entries:

Sept. 1:

Debit Precast Direct Materials Inventory $1,170,000

Credit Accounts Payable $1,170,000

To record the purchase of materials on account for Precast.

Debit Work in Process-Precast $720,000

Debit Manufacturing Overhead (Precast Dept.) $450,000

Credit Precast Direct Materials Inventory $1,170,000

Sept. 4:

Debit Manufacturing Overhead  (Construction Dept.):

Utilities Expense $30,000

Credit Utilities Payable $30,000

To recorde utilities installed at bridge site.

Sept 6:

Debit Manufacturing Overhead (Precast Dept.):

Rent Expense $7,200

Credit Cash Account $7,200

To record the payment of rent for the temporary construction site.

Sept. 15:

No journal entries.

Sept 19:

Debit Manufacturing Overhead (Construction Dept.):

Machine Rental Expense $65,000

Credit Cash Account $65,000

To record the payment of machine rental expense

Sept. 23:

Debit Direct Materials Inventory $1,510,000

Credit Accounts Payable $1,510,000

To record the purchase of additional materials on account.

Sept. 30:

Debit:

Utilities Payable-Precast Dept $7,200

Direct labor -Precast Dept. $50,000

Debit Manufacturing Overhead (Precast Dept.):

  Insurance Expense- Precast $6,700

  Indirect labor $8,200

Credit Cash Account $72,100

Debit Manufacturing Overhead (Precast Dept.):

Depreciation Expense$21,500

Credit Accumulated Depreciation - Precast Dept $21,500

To record the depreciation expense for the month.

Sept. 30:

Debit Work in Process: Direct labor $19,500

Debit Manufacturing Overhead (Construction Dept.):

Utilities Expense t $2,600

Indirect labor $6,100

Insurance Expense $2,500

Credit Cash Account $30,700

Debit Manufacturing Overhead (Construction Dept.):

Depreciation Expense $9,450

Credit Accumulated Depreciation - Construction Dept $9,450

To record the depreciation expense for the month.

Debit Accounts Payable $2,680,000

Credit Cash Account $2,689,000

To record the payment on account by a check issued.

Debit Work in Process (Precast) $192,000

Credit Manufacturing Overhead (Precast) $192,000

To apply overhead to production in Precast Dept.

Debit Work in Process (Construction Dept.) $29,250

Credit Manufacturing Overhead (Construction Dept.) $9,250

To apply overhead to production in the construction department.

October:

Oct. 1:

Debit Manufacturing Overhead (Construction Dept.) $7,000

Credit Cash Account $7,000

To record the cost of rental a crane.

Oct. 4:

Debit Raw Materials Inventory (Precast) $860,000

Debit Manufacturing Overhead (Precast) $150,000

Credit  Raw Materials Inventory.

Oct. 7:

Debit Manufacturing Overhead (Precast Dept.):

Rent Expense $7,500

Credit Cash Account $7,500

To record the payment of rent for cash.

Oct. 12:

Debit Work in Process (Construction Dept.) $220,000

Debit Manufacturing overhead-170,000

Credit Raw Materials $390,000

To record the issue of materials to the construction dept.

Oct. 15:

No Journal Entries required

Oct. 25:

No Journal Entries required

Oct. 29:

No. Journal Required

Oct. 31:

Debit:

Work in Process (Direct labor) $120,000

Manufacturing Overhead (Precast):

Utilities $14,000

Insurance $10,200

Indirect labor $18,300

Credit Cash Account $162,500

Oct. 31:

Debit Manufacturing Overhead (Precast Dept.):

Depreciation Expense$21,500

Credit Accumulated Depreciation - Precast Dept $21,500

To record the depreciation expense for the month.

Oct 31:

Debit Work in Process: Direct labor $144,500

Debit Manufacturing (Construction Dept.):

Utilities Expense t $5,300

Indirect labor $19,200

Insurance Expense $7,400

Credit Cash Account $176,400

To record the payment of cash for the expense

Debit Manufacturing Overhead (Construction Dept.):

Depreciation Expense $9,450

Credit Accumulated Depreciation - Construction Dept $9,450

To record the depreciation expense for the month.

Debit Work in Process (Precast) $123,600

Credit Manufacturing Overhead (Precast) $123,600

To apply overhead to production in Precast Dept.

Debit Work in Process (Construction Dept.) $216,750

Credit Manufacturing Overhead (Construction Dept.) $216,750

To apply overhead to production in the construction department.

Debit Accounts Receivable (State of Montana) $3,850,000

Credit Service Revenue $3,850,000

To record the billing of the state for the completed bridge.

Debit Finished Goods Inventory $1,835,600

Credit Work in Process $1,835,600

To record the cost of the completed jobs.

Explanation:

a) Data:

Estimated costs for Kleinfeld River Bridge

                                  Precast         Construction

                               Department     Department

Direct materials     $ 1,750,000     $ 400,000

Direct labor                 240,000          180,000

Overhead                   300,000         260,000

Overhead application   $30 per DMH     150% DL

Machine hours worked 6,400 MH       $19,500

Work in Process:

Materials                         $720,000

Direct labor (precast)         50,000

Direct labor (construction) 19,500

Overhead applied            192,000

Overhead applied             29,250

Materials                         220,000

Direct labor                     120,000

Direct labor                     144,500

Overhead applied          123,600

Overhead applied          216,750

Total cost                  $1,835,600

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