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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for process cost system

Preston & Grover Soap Company manufactures powdered detergent. Phosphate is placed in process in the Making Department, where it is turned into granulars. The output of Making is transferred to the Packing Department, where packaging is added at the beginning of the process. On July 1, Preston & Grover Soap Company had the following inventories:

Finished Goods $13,500
Work in Process—Making 6,790
Work in Process—Packing 7,350
Materials 5,100

Departmental accounts are maintained for factory overhead, which both have zero balances on July 1.

Manufacturing operations for July are summarized as follows:

a Materials purchased on account $149,800
b Materials requisitioned for use  
Phosphate—Making Department $105,700
Packaging—Packing Department 31,300
Indirect materials—Making Department 4,930
Indirect materials—Packing Department 1,530
c. Labor used  
Direct labor—Making Department $32,400
Direct labor—Packing Department 40,900
Indirect labor—Making Department 15,400
Indirect labor—Packing Department 18,300
d Depreciation charged on fixed assets:  
Making Department $10,700
Packing Department 7,900
e. Expired prepaid factory insurance:  
Making Department $2,000
Packing Department 1,500
f. Applied factory overhead  
Making Department $32,570
Packing Department 30,050
g Production costs transferred from Making Department to Packing Department $166,790
h Production costs transferred from Packing Department to Finished Goods $263,400
i. Cost of goods sold during the period $265,200

Instructions

1. Journalize the entries to record the operations, identifying each entry by letter.

2. Compute the January 31 balances of the inventory accounts.

3. Compute the January 31 balances of the factory overhead accounts.

(1-a)

To determine

Work in process costs

It is the cost of production process that is used to manufacture partly completed products. It comprises the cost of raw materials, labor, and overhead that incurred for the production process of the products at various phases.

Direct materials cost

Manufacturing products arise with raw materials that are altered into finished products. The cost of any material that is an important part of the finished product is categorized as a direct materials cost.

Conversion cost

Cost of changing the materials into a finished product. It includes direct labor costs and factory overhead costs.

To Prepare: The journal entry to record material purchased on account of Company PGS.

Explanation

Prepare the journal entry to record material purchased on account of Company PGS as shown below:

Account title and Explanation Debit Credit
Materials $149,800
 Accounts payable

(1-b)

To determine

To Prepare: The journal entry to record material requisition used for production of Company PGS.

(1-c)

To determine

To Prepare: The journal entry to record labor used for production of Company PGS.

(1-d)

To determine

To Prepare: The journal entry to record accumulated depreciation on fixed asset of Company PGS.

(1-e)

To determine

To Prepare: The journal entry to record expired prepaid factory insurance of Company PGS.

(1-f)

To determine

To Prepare: The journal entry to record applied factory overhead of Company PGS.

(1-g)

To determine

To Prepare: The journal entry to record production costs transferred from making department to packing department of Company PGS.

(1-h)

To determine

To Prepare: The journal entry to record production costs transferred from Packing department to finished goods of Company PGS as shown below:

(1-i)

To determine

To Prepare: The journal entry to record cost of goods sold during the period of Company PGS.

(2)

To determine

To Compute: The ending balance of inventory accounts of Company PGS.

(3)

To determine

To Compute: The ending balance of factory overhead accounts of Company PGS.

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