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1.
(a)
To compute: Cost of transferred products form production to finished products.
1.
(a)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Given,
Opening work in process inventory is $156,000.
Production cost incurred during the month is $732,500.
Closing work in process inventory is $250,000.
Formula for calculation of cost of completed and transferred goods,
Substitute, $156,000 foropening work in process inventory, $732,500 for production cost incurred during the month, and $250,000 forclosing work in process inventory.
Hence, cost of completed and transferred goods is $638,500.
Working notes:
Calculation forproduction cost incurred during the month,
(b)
To compute: Cost of goods sold.
(b)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Given,
Opening finished goods inventory is $160,000.
Completed and transferred goods are $638,500.
Closing finished goods inventory is $198,000.
Formula for calculation of cost of goods sold,
Substitute, $160,000 foropening finished goods inventory, $638,500 for completed and transferred goods and $198,000 forclosing finished goods inventory.
Hence, cost of goods sold is $600,500.
2.
To prepare:
2.
![Check Mark](/static/check-mark.png)
Explanation of Solution
(a)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Raw Material Inventory | 200,000 | ||
Accounts payable | 200,000 | |||
(Beingraw material inventory is purchased on credit ) |
Table(1)
- Raw material inventory is an asset. Since, raw material inventory is purchased, it increases asset. Hence debit raw material inventory account
- Account payable is a liability. Since, asset is purchased but not paid yet it increases liability. Hence, credit accounts payable account.
(b)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Work in Process | 120,000 | ||
Raw Material Inventory | 120,000 | |||
(Beingraw material directly used in production) |
Table(2)
- Work in process is an asset. Since, material is used to manufacture good but not completed yet, it increases work in process. Hence, debit work in process account.
- Raw material inventory is an asset. Since, raw material is used, it decreases asset. Hence, credit raw material inventory account.
(c)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Factory Overhead | 42,000 | ||
Raw Material Inventory | 42,000 | |||
(Beingraw material indirectly used in production)) |
Table(3)
- Factory overhead is an expense. Since, raw material inventory is used, it increases expense. Hence, debit factory overhead.
- Raw material inventory is an asset. Since, raw material is used, it decreases asset. Hence, credit raw material inventory account.
(d)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Work in Process | 350,000 | ||
Factory Wages Payable | 350,000 | |||
(Beingdirect labor expenses incurred during production ) |
Table(4)
- Work in process is an asset. Since, labor is used to manufacture, it increases work in process. Hence, debit work in process account.
- Factory wages payable is a liability. Since, expense is incurred and expense reduces equity. Hence, credit factory wages payable account
(e)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Factory Overhead | 50,000 | ||
Factory Wages Payable | 50,000 | |||
(Beingindirect labor expenses incurred during production ) |
Table(5)
- Factory overhead is an expense. Since, labor is used, it increases expense. Hence, debit factory overhead.
- Factory wages payable is a liability. Since, expense is incurred and expense reduces equity. Hence, credit factory wages payable account.
(f)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Factory Wages Payable | 400,000 | ||
Cash | 400,000 | |||
(Beingfactory wages paid)) |
Table(6)
- Factory wages payable is a liability. Since, liability is paid, it decreases liability. Hence, debit factory wages payable account
- Cash is an asset. Since, cash is used to pay liability, it decreases asset. Hence, debit cash account.
(g)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Factory Overhead | 170,500 | ||
Other Accounts | 170,500 | |||
(Beingother indirect expenses incurred) |
Table(7)
- Factory overhead is an expense. Since, other overhead cost are indirect, it increases expense. Hence, debit factory overhead.
- Other accounts are expense to the company. Since, expense reduces equity, other accounts is credited.
(h)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Work in Process | 262,500 | ||
Factory overhead | 262,500 | |||
(Beingfactory overhead cost applied ) |
Table(8)
- Work in process is an asset. Since, indirect labor is used to manufacture, it increases work in process. Hence, debit work in process-weaving account.
- Factory overhead is an expense. Since, factory overhead is transferred to work in process, it decreases factory overhead. Hence, credit factory overhead account.
(i)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Finished Goods Inventory | 638,500 | ||
Work in Process | 638,500 | |||
(Beinggoods transferred from sewing to finished goodsdepartment ) |
Table(9)
- Finished goods inventory is an asset. Since, finished goods inventory is increased, it increases asset. Hence, debit finished goods inventory account.
- Work in process is an asset. Since, goods is transferred from sewing to finished goods department, it decreases work in process account. Hence, credit work in process account.
(j)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | 1,000,000 | |||
Sales Revenue | 1,000,000 | |||
(Beinggoods soldon credit) |
Table(10)
- Accounts receivable is an asset. Since, sales have taken place, but money not received yet. Hence, debit account receivables account.
- Sales revenue is revenue for the company. Since, goods is sold, it increases revenue. Hence, credit sales revenue account.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 30 | Cost of Goods Sold | 600,500 | ||
Finished Goods Inventory | 600,500 | |||
(Beingcost of goods sold is recorded ) |
Table(11)
- Cost of goods sold is an expense. Since, expense is increased it reduces equity. Hence, debit cost of goods sold account.
- Finished goods inventory is an asset. Since, finished goods inventory is increased, it increases asset. Hence, credit finished goods inventory account.
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FIN & MANAGERIAL ACCT VOL 2 W/CONNECT
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