Problem III

1.

• Contributions of cash by the operators

Cash 360,000

KK Company 180,000

Cerise Company 180,000

Contribution by joint operators.

• Use of cash and loan to buy machinery & equipment and raw materials

Machinery and equipment 96,000

Cash 60,000

Loans payable – machinery and equipment 36,000

Contribution by joint operators.

Materials 78,000
Accounts payable 78,000

Acquisition of materials.

• Labor incurrence

Payroll 86,400

Cash 84,000

Accrued payroll 2,400

Annual labor.

• Loans from the bank

Cash 72,000

Bank loans payable 72,000

Amount borrowed.

• Repayment of loan – machinery and equipment and other factory expenses

Loan payable – machinery and equipment 12,000

Cash 12,000

Partial payment of loan.

Accounts payable 50,400

Cash 50,400

Payment of trade creditors.

Factory overhead control – heat, light and power 156,000

Cash 156,000

Payment of manufacturing expenses such as heat, light

and power.

• Depreciation of machinery and equipment

Factory overhead control – depreciation 9,600

Accumulated depreciation 9,600

Depreciation of equipment.

• Transfer of materials, labor and overhead to Work-in-Process