The records of Fremont Corporation’s initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs. Units Unaudited Costs Work-in-process inventory 145,000 $ 799,927 Finished goods inventory 20,000 345,110 As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available. Costs Units Direct Materials Direct Labor Beginning inventory (80% complete as to labor) 79,000 $ 453,100 $ 655,000 Units started 450,000 Current costs 1,610,000 2,218,000 Units completed and transferred to finished goods inventory 384,000 Required: a. Prepare a production cost report for Fremont using the weighted-average method. (Hint: You will need to calculate equivalent units for three categories: materials, labor, and overhead.) (Round "Cost per equivalent unit" to 2 decimal places.) b. Show the journal entry required to correct the difference between the unaudited records and actual ending balances of Work-in-Process Inventory and Finished Goods Inventory. Debit or credit Cost of Goods Sold for any difference. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) c. If the adjustment in requirement (b) is not made, will the company’s income and inventories be overstated or understated?
The records of Fremont Corporation’s initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs.
| Units | Unaudited Costs | |||
| Work-in-process inventory | 145,000 | $ | 799,927 | |
| Finished goods inventory | 20,000 | 345,110 | ||
As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available.
| Costs | |||||||
| Units | Direct Materials | Direct Labor | |||||
| Beginning inventory (80% complete as to labor) | 79,000 | $ | 453,100 | $ | 655,000 | ||
| Units started | 450,000 | ||||||
| Current costs | 1,610,000 | 2,218,000 | |||||
| Units completed and transferred to finished goods inventory | 384,000 | ||||||
Required:
a. Prepare a production cost report for Fremont using the weighted-average method. (Hint: You will need to calculate equivalent units for three categories: materials, labor, and overhead.) (Round "Cost per equivalent unit" to 2 decimal places.)
b. Show the
c. If the adjustment in requirement (b) is not made, will the company’s income and inventories be overstated or understated?
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