Chapter 20, Problem E20.27E

To determine

Introduction:

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

Process Costing

• Process Costing is a method of cost allocation and calculation used when the types of goods produced are similar in nature and in large quantities.

• The cost allocation is done for all products on basis of a standard cost estimate which is calculated by dividing the total costs for each process by the number of units produced.

• The advantage of this method is that it allows for simple and efficient cost allocation and calculation especially when the variations in the types of goods produced are minimal.

Work In Process Accounts

• Work in Process accounts are maintained in a Process costing system to account for the various types of direct costs incurred in the form of direct material, labor and overhead.

• The costs of production directly attributable to the goods manufactured are recorded in a Work in process account.

• The costs of Goods completed in production are transferred to the finished goods from the Work in Process Account.

To Prepare:

Journal Entries for Galvan Company