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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Journal Entries, Basic Cost Flows

In December, Davis Company had the following cost flows:

Chapter 6, Problem 42E, Journal Entries, Basic Cost Flows In December, Davis Company had the following cost flows: Required:

Required:

  1. 1. Prepare the journal entries to transfer costs from (a) Molding to Grinding, (b) Grinding to Finishing, and (c) Finishing to Finished Goods.
  2. 2. CONCEPTUAL CONNECTION Explain how the journal entries differ from a job-order cost system.

1.

To determine

Journalize the transactions related to transfer costs from molding to grinding, grinding to finishing and finishing to finished goods.

Explanation

Transfer-in Cost:

A cost transferred from the previous process to the next process is known as transfer-in cost. In other words transfer-in cost is a cost which acts as a raw material cost to the next process.

Pass journal entry to record the cost transfer out from molding department as shown below:

DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

 Work in Process(Grinding) 128,000 
 Work in Process(Molding)  128,000
 (To record cost transfer out from molding department )   

Table (1)

The cost transferred from molding department increases the cost of grinding department. This is the reason to debit the work in process of grinding department.

Cost is transferred from molding department to grinding department. This is the reason that the amount of molding cost decreases. Therefore balance of work in process of molding department is credited.

Pass journal entry to show cost transferred out from grinding department as shown below:

DateAccount Title and ExplanationPost Ref...

2.

To determine

Describe the difference between the entries of job order cost system and process costing system.

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