Managerial Accounting (Looseleaf)
Managerial Accounting (Looseleaf)
7th Edition
ISBN: 9781260482935
Author: Wild
Publisher: MCG
Question
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Chapter 3, Problem 4BTN
To determine

Work in Process Inventory Account:

Work in process inventory account is asset accounts which show the balances of all partial produced products.

Raw Material Inventory Account:

Raw material inventory account is an asset account which show the balance of all those material which are not yet used to make a final product or work in progress.

Journal Entries:

It is a book of original entry. It records and summarizes financial transaction of an entity in chronological manner, generally according to dual aspect of accounting.

Accounting rules regarding journal entries:

  • Balance increase when: Assets, losses and expenses get debited and liabilities, gains, and revenue get credited.
  • Balance decrease when: Assets, losses and expenses get credited and liabilities, gains, and revenue get debited.

To prepare: Journal entry that takes place in process costing.

Expert Solution & Answer
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Explanation of Solution

Journal entry for process costing.

Raw material purchase:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Raw Material Inventory
    Accounts payable
    (Being raw 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.

Direct material used:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work in Process
    Raw Material Inventory
    (Being raw 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.

Indirect material used:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Factory Overhead
    Raw Material Inventory
    (Being raw 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.

Direct labor used:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work in Process
    Factory Wages Payable
    (Being direct 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

Indirect labor used:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Factory Overhead
    Factory Wages Payable
    (Being indirect 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

Factory payroll paid:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Factory Wages Payable
    Cash
    (Being factory 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.

Applied overhead:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work in Process
    Factory overhead
    (Being factory overhead cost applied )

                                                      Table (7)

  • 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.

Transfer to blending department:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Work in Process-Blending
    Work in Process-Roasting
    (Being goods transferred from roasting to blending department )

                                                      Table (8)

  • Work in process-blending is an asset. Since, work in process-blending is increased, it increases asset. Hence, debit work in process-blending account.
  • Work in process-roasting is an asset. Since, goods is transferred from roasting to blending department, it decreases work in process-roasting account. Hence, credit work in process-roasting account.

Transfer to finished goods department:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Finished Goods Inventory
    Work in Process-Blending
    (Being goods transferred from blending to finished goods department )

                                                      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-blending is an asset. Since, goods is transferred from blending to finished goods department, it decreases work in process-blending account. Hence, credit work in process-blending account.

Delivered to consumers:

    Date Account Title and Explanation Post ref Debit ($) Credit ($)
    Accounts receivable
    Sales Revenue
    (Being goods sold on 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 ($) Credit ($)
    Cost of Goods Sold
    Finished Goods Inventory
    (Being cost 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, debit finished goods inventory account.

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Chapter 3 Solutions

Managerial Accounting (Looseleaf)

Ch. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Direct labor costs Flow through what accounts in a...Ch. 3 - Prob. 10DQCh. 3 - Prob. 11DQCh. 3 - Prob. 12DQCh. 3 - 13. List the four steps in accounting for...Ch. 3 - 14. APPLE Companies such as Apple commonly...Ch. 3 - 15. GOOGLE Are there situations where Google can...Ch. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - Prob. 19DQCh. 3 - Process vs. job order operations C1 For each of...Ch. 3 - Prob. 2QSCh. 3 - Prob. 3QSCh. 3 - Physical flow reconciliation C2 The following...Ch. 3 - Prob. 5QSCh. 3 - Prob. 6QSCh. 3 - Prob. 7QSCh. 3 - Prob. 8QSCh. 3 - Prob. 9QSCh. 3 - Prob. 10QSCh. 3 - Prob. 11QSCh. 3 - Prob. 12QSCh. 3 - Prob. 13QSCh. 3 - Prob. 14QSCh. 3 - Prob. 15QSCh. 3 - Prob. 16QSCh. 3 - Prob. 17QSCh. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - Prob. 21QSCh. 3 - Prob. 22QSCh. 3 - Prob. 23QSCh. 3 - Prob. 24QSCh. 3 - Prob. 25QSCh. 3 - Prob. 26QSCh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Prob. 8ECh. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Exercise 16-13AFIFO: Completing a process cost...Ch. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Exercise 16-16 Weighted average: Process cost...Ch. 3 - Prob. 17ECh. 3 - Prob. 18ECh. 3 - Prob. 19ECh. 3 - Prob. 20ECh. 3 - Prob. 21ECh. 3 - Prob. 22ECh. 3 - Prob. 23ECh. 3 - Prob. 24ECh. 3 - Prob. 25ECh. 3 - Prob. 26ECh. 3 - Prob. 1PSACh. 3 - Prob. 2PSACh. 3 - Prob. 3PSACh. 3 - Prob. 4PSACh. 3 - Problem 16-5AA FIFO: Process cost summary;...Ch. 3 - Prob. 6PSACh. 3 - Prob. 7PSACh. 3 - Prob. 1PSBCh. 3 - Prob. 2PSBCh. 3 - Prob. 3PSBCh. 3 - Problem 16-4B Weighted average: Process cost...Ch. 3 - Problem 16-5BA FIFO: Process cost summary;...Ch. 3 - Prob. 6PSBCh. 3 - Prob. 7PSBCh. 3 - Prob. 3SPCh. 3 - Prob. 3CPCh. 3 - Prob. 1GLPCh. 3 - Prob. 1AACh. 3 - Prob. 2AACh. 3 - Prob. 3AACh. 3 - Prob. 1BTNCh. 3 - Prob. 2BTNCh. 3 - Prob. 3BTNCh. 3 - Prob. 4BTNCh. 3 - Prob. 5BTNCh. 3 - Prob. 6BTN
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