COGS Journal entries
Problem 1
Sterling Millwork, Ltd., produces reproductions of antique residential moldings at a plant located
in Indang, Cavite. Since there are hundreds of products, some of which are made only to order,
the company uses a job order costing system. On July 1, the start of the company’s fiscal year,
inventory account balances was as follows:
Raw materials P10, 000
Work in process 4, 000
Finished goods 8, 000
Total P22, 000
The company applies overhead cost to jobs on the basis of machine-hours using the same
principles followed by companies in the Philippines and elsewhere. For the fiscal year starting
July, it was estimated that the plant would operate 45, 000 machine hours and incur P99,
000 in manufacturing overhead cost. During the year, the following transactions were
completed:
a. Raw materials purchased on account, P160, 000.
b. Raw materials requisitioned for use in production, P140, 000(materials costing P120,
000 were chargeable directly to jobs; the remaining materials were indirect).
c. The payroll before deducting 14% withholding tax, and the employees’ share of 5% SSS
contribution, 1.5% Philhealth contribution; and Pagibig contribution of 1.5% was
P220, 000. The wages due the employees were paid.
d. Cost for employee services were incurred as follows:
Direct labor P90, 000
Indirect labor 60, 000
Sales commissions 20, 000
Administrative salaries 50, 000
Employer’s contribution for all employee categories:
SSS 5%
Philhealth 2%
Pagibig 2%
e. Prepaid insurance expired during the year, P18, 000 (P13, 000 of this amount related to
factory operations, and the remainder related to administrative activities)
f. Depreciation recorded on equipment, P25, 000. (P20, 000 of this amount was on
equipment used in factory operations; the remaining P5, 000 was on equipment used in
selling activities).
g. Manufacturing overhead cost was applied to production, P__?___ . (The company
recorded 50, 000 machine-hours of operating time during the year.)
h. Goods that had cost P310, 000 were transferred into the finished goods warehouse.
(COGM)
i. Sales (all on account) to customers during the year totaled P498, 000. These goods had
cost P308, 000 to manufacture according to their job cost sheets. (COGS)
‘
Required:
1. Entries to record the transactions.
2. Statement of cost of goods sold.
Problem 2
ABC Company completed the following transactions for October, 2025.
a. Purchased on account direct materials of P275, 000.
b. The factory payroll was recorded. Direct labor P75, 000; indirect labor P25, 000.
Employee payroll deductions were recorded as follows:
Withholding taxes P14, 000
SSS Premiums 3, 000
Philhealth Contributions 470
Pag-ibig Funds Contribution 2, 025
c. Indirect materials purchased P30, 000.
d. Materials issued: direct materials – P150, 000; indirect materials – P12, 500.
e. Defective materials P6, 250 were returned to vendors.
f. Accounts payable totaling P185, 375 and accrued payroll, were paid.
g. Sundry factory expenses of P31, 125 were recorded as liabilities.
h. Factory overhead was charged to production at 120% of direct labor costs.
i. Goods completed with a total cost of P225, 000 were transferred to finished goods.
j. Sales were P265, 500 and cost P175, 000 to produce.
Required:
1. Entries to record the transactions.
2. Statement of cost of goods sold.
Problem 3
Incomplete accounts of the Janice Company appear as follows on January 31.
Materials inventory Work in process
Bal. 15,000 Bal. 0 CofGM 40,000
Purch. 35,000 Mat. 20,000
Labor
OH
Finished goods
Bal. 10,000 CofGS 20,000
GM 40,000
Additional information
a. There were 5,500 direct labor hours at the rate of P 8.00 per direct labor hour
b. Overhead is applied at the rate of P 4.00 per direct labor hour
1.The January 31 of materials inventory should be
2.The total overhead that have been charged to work in process during January
3. The January 31 balance of the Work in Process account
4. The January 31 balance of the finished goods inventory account.
5 Total manufacturing overhead costs incurred during the month of January were P24,000. The
amount debited to factory overhead account for January.
6. Cost of Goods Sold during January was
7. The amount of under applied or over applied overhead cost for January is
