Problem: Schmeltz Industries organized in January and recorded the following transactions during its first months of operation:
Jan. 5 Purchased materials on account for $800,000.
Jan. 9 Used materials costing $450,000 on job no. 1001.
Jan. 14 Used materials costing $200,000 on job no. 1002.
Jan. 18 Used materials costing $100,000 on job no. 1003.
Jan. 25 Applied the following direct labor costs to jobs: job no. 1001, $3,600; job no.1002, $5,400; job no. 1003, $1,350. (Direct labor workers earn $18 per hour.)
Jan. 27 Applied manufacturing overhead to all jobs at a rate of $450 per direct labor hour.
Jan. 28 Completed and transferred job no. 1001 and job no. 1002 to the finished goods warehouse.
Jan. 29 Sold job no. 1001 on account for $725,000.
Jan. 31 Recorded and paid actual January manufacturing overhead costs of $250,000, cash.
Jan. 31 Closed the Manufacturing Overhead account directly to Cost of Goods Sold.
a. Prepare journal entries for each of the above transactions.
b. Compute the balance of the Cost of Goods Sold account at January 31.
c. Determine the company's inventory balances at January 31.
d. Was manufacturing overhead in January overapplied, or was it underapplied? Explain.