Crawford Corporation incurred the following transactions.
1. Purchased raw materials on account $47,000.
2. Raw Materials of $44,200 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $7,300 was classified as indirect materials.
3. Factory labor costs incurred were $60,100, of which $51,000 pertained to factory wages payable and $9,100 pertained to employer payroll taxes payable.
4. Time tickets indicated that $54,400 was direct labor and $5,700 was indirect labor.
5. Manufacturing overhead costs incurred on account were $83,600.
6. Depreciation on the company’s office building was $8,600.
7. Manufacturing overhead was applied at the rate of 160% of direct labor cost.
8. Goods costing $94,800 were completed and transferred to finished goods.
9. Finished goods costing $81,800 to manufacture were sold on account for $110,300.
Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No. Account Titles and Explanation Debit Credit
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(To record the sale)
(To record the cost of the sale)
Accounts Payable
Accounts Receivable
Accumulated Depreciation-Buildings
Accumulated Depreciation Equipment
Cash
Cost of Completed Service Contracts
Cost of Goods Sold
Depreciation Expense
Employer Fringe Benefits Payable
Employer Payroll Taxes Payable
Factory Labor
Factory Wages Payable
Finished Goods Inventory
Manufacturing Overhead
Operating Overhead
Prepaid Property Taxes
Raw Materials Inventory
Salaries and Wages Payable
Sales Revenue
Service Contracts in Process
Service Salaries and Wages
Supplies
Utilities Payable
Work in Process Inventory

Answer and Explanation:

As per the data given in the question,

1. Raw material inventory A/c Dr. $47,000

            To accounts payable Cr. $47,000

(Being raw material purchased)

2. Work in process inventory A/c Dr. $36,900

   Manufacturing overhead A/c Dr. $7,300

                    To Raw material inventory Cr. $44,200

(Being the raw material requisitioned is recorded)

3. Factory payroll A/c Dr.$60,100

               To wages payable Cr. $51,000

               To payroll taxes payable Cr. $9,100

(Being factory payroll is recorded)

4. . Work in process inventory A/c Dr. $54,400

    Manufacturing overhead A/c Dr. $5,700

                     To factory payroll Cr. $60,100

(Being the direct labor and the indirect labor is recorded)

5. Manufacturing overhead A/c Dr. $83,600

                 To accounts payable Cr. $83,600

(Being the manufacturing overhead is recorded)

6. Depreciation expense A/c Dr. $8,600

                To accumulated depreciation Cr. $8,600

(Being the depreciation expense is recorded)

7. Work in process inventory A/c Dr. $87,040   ($54,400×160%)

                 To Manufacturing overhead Cr. $87,040

(Being the applied manufacturing overhead is recorded)

8. Finished goods inventory A/c Dr. $94,800

              To Work in process inventory Cr. $94,800

(Being the transferred goods are recorded)

9. Accounts receivable A/c Dr. $110,300

             To Sales revenue Cr. $110,300

(Being the sales revenue is recorded)

Cost of goods sold A/c Dr. $81,800

         To finished goods inventory Cr. $81,800

(Being the cost of goods sold is recorded)

b. companies use transfer prices to manipulate prices and, therefore, taxes

Explanation:

Organisation for Economic Co-operation and Development was established on the 30th of September, 1961 and it comprises of 38 member countries. It is an intergovernmental organization that is saddled with the responsibility of stimulating economic growth and world trade among member countries.

The OECD is concerned about transfer pricing practices because companies use transfer prices to manipulate prices and, therefore, taxes