Question:Lally, Inc. produces universal remote controls. Lally uses a JIT costing system. One of the company’s products has a standard direct materials cost of \(9 per unit and a standardconversion cost of \)35 per unit. During January 2018, Lally produced 500 unitsand sold 495 units on account at \(45 each. It purchased \)4,800 of direct materials onaccount and incurred actual conversion costs totaling \(14,000.

Requirements

1. Prepare summary journal entries for January.

2. The January 1, 2018, balance of the Raw and In-Process Inventory account was\)70. Use a T-account to find the January 31 balance.

3. Use a T-account to determine whether conversion costs are overallocated orunderallocated for the month. By how much? Prepare the journal entry to adjustthe Conversion Costs account.

Date

Description

Debit

Credit

Trans 1

Raw and In-process Inventory

$4,800

Accounts Payable

$4,800

Being inventories purchased on account

Trans 2

Conversion Cost

$14,000

Expenses Payable

$14,000

Being conversion cost incurred

Trans 3

Finished Goods Inventory

$21,780

Raw and In-process inventory

$4,500

Conversion cost

$17,500

Being inventory and cost transferred to finished goods

Trans 4

Accounts Receivables

$22,275

Sales revenue

$22,275

Being Sales made

Trans 5

Cost of goods sold

$21,780

Finished Goods Inventory

$21,780

Cost of goods sold recorded

Date

Particular

Amount

Date

Particular

Amount

Jan 1

Opening balance

$70

Tran 3

Finished Goods Invt

$4,500

Jan

Accounts payable

$4,800

Jan 31

Closing balance

$370

Date

Particular

Amount

Date

Particular

Amount

Tran 2

Expenses Payable

$14,000

Jan

Finished Goods Invt

$17,500

Jan 31

Cost of goods sold

$3,500

Date

Description

Debit

Credit

Jan 31

Conversion Cost

$3,500

Cost of goods sold

$3,500

Being cost conversion over-allocated