Wilkin Products Ltd. makes a single product using two processes. Quality control check takes place during the process, at which point, rejected units are separated from good units.The following details relate to production for the month of April 20X7, for Process 2.(i) Work-in-process, beginning inventory: -0-(ii) Transfer from Process 1: 15,000 units valued at $51.40 each(iii) Other manufacturing costs incurred during April:Direct material added                      $513,000Direct labour                                    $365,000Manufacturing overhead                 $211,000(iv) Normal losses were estimated to be 5% of input during the period. The scrap value of any loss is $40 per unit.(v) At inspection 1,750 units were rejected as scrap. These units had reached the following degree of completion:Input material                          100%Direct material added              50%Conversion costs                      30%(vi) 12,000 units were completed and transferred to Finished Goods Inventory.(vii) Work-in-process at the end of April had reached the following degree of completion:Input material                          100%Direct material added              80%Conversion costs                      40%SOLVE: (1) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of goods completed and transferred to finished goods. (2) Given that 20% of the unexpected losses were as a result of pilferage, prepare the abnormal spoilage statement, clearly showing Wilkin Product’s true loss.

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Asked Nov 11, 2019
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Wilkin Products Ltd. makes a single product using two processes. Quality control check takes place during the process, at which point, rejected units are separated from good units.


The following details relate to production for the month of April 20X7, for Process 2.


(i) Work-in-process, beginning inventory: -0-


(ii) Transfer from Process 1: 15,000 units valued at $51.40 each


(iii) Other manufacturing costs incurred during April:

Direct material added                      $513,000
Direct labour                                    $365,000
Manufacturing overhead                 $211,000

(iv) Normal losses were estimated to be 5% of input during the period. The scrap value of any loss is $40 per unit.


(v) At inspection 1,750 units were rejected as scrap. These units had reached the following degree of completion:
Input material                          100%
Direct material added              50%
Conversion costs                      30%

(vi) 12,000 units were completed and transferred to Finished Goods Inventory.


(vii) Work-in-process at the end of April had reached the following degree of completion:
Input material                          100%
Direct material added              80%
Conversion costs                      40%

SOLVE: 
(1) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of goods completed and transferred to finished goods. 


(2) Given that 20% of the unexpected losses were as a result of pilferage, prepare the abnormal spoilage statement, clearly showing Wilkin Product’s true loss.

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Expert Answer

Step 1

Journal entries involve the recording of monetary transactions of a business on daily basis. The transactions are recorded by crediting one account and by debiting the other account.

Abnormal spoilage refers to the amount of loss of the inventory due to broken machinery or any other abnormal reason. It is loss of inventory beyond normal loss.

Step 2

1)

Journal entries are ...

Debit (&
1,089,000
Credit (&
Account title & explanation
Work-in process inventory
Date
....Direct material
513,000
365,000
211,000
Direct labor
..Manufacturing overheads
(to record assignment of costs to process 2)
Finished goods inventory
...Work-in process 2
(to record transfer to finished goods)
1,620,000
1,620,000
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Debit (& 1,089,000 Credit (& Account title & explanation Work-in process inventory Date ....Direct material 513,000 365,000 211,000 Direct labor ..Manufacturing overheads (to record assignment of costs to process 2) Finished goods inventory ...Work-in process 2 (to record transfer to finished goods) 1,620,000 1,620,000

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