Question:Low Range produces fleece jackets. The company uses JIT costing for its JIT production system.

Low Range has two inventory accounts: Raw and In-Process Inventory and

Finished Goods Inventory. On March 1, 2018, the account balances were Raw and In-Process Inventory, \(9,000; Finished Goods Inventory, \)1,700.

The standard cost of a jacket is \(40, composed of \)12 direct materials plus \(28 conversion costs. Data for March’s activities follow:

Number of jackets completed 15,000

Number of jackets sold (on account, for \)50 each) 14,600

Direct materials purchased (on account) \( 177,500

Conversion costs incurred \) 521,000

Requirements

2. Prepare summary journal entries for March. Underallocated or overallocated conversion costs are adjusted to Cost of Goods Sold monthly.

Step by step solution

01

Summary of journal entries for March transactions

	Journal entry
Date	Description	Debit	Credit
Trans. 1	Raw and In-Process Inventory	$ 177,500
	Accounts Payable		$ 177,500
	Being inventories purchased on credit
Trans. 2	Conversion Costs	521,000
	Labor and overheads cost payable		521,000
	Being conversion cost incurred
Trans. 3	Finished goods inventory	600,000
	Raw and In-process inventory		180,000
	Conversion Costs		420,000
	Being completed 15,000 goods transferred to the finished inventory account at standard cost

02

 Step 2: Journal entries for Sales transaction

Date	Description	Debit	Credit
Trans. 4	Accounts Receivables	$ 730,000
	Sales Revenue		$ 730,000
	Being goods sold on credit
Trans. 5	Cost of goods sold	584,000
	Finished goods inventory		584,000
	Being cost of goods sold for sold units at standard cost

03

Journal entries for Adjustment

Date	Description	Debit	Credit
Trans. 6	Cost of goods sold	$ 101,000
	Conversion cost		$ 101,000
	Being under allocated conversion cost transferred to cost of goods sold account

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