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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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To record the transfer of costs from a prior process to a subsequent process, the following entry would be made:

  1. a. debit Finished Goods and credit Work in Process.
  2. b. debit Work in Process (subsequent department) and credit Transferred-In Materials.
  3. c. debit Work in Process (prior department) and credit Work in Process (subsequent department).
  4. d. debit Work in Process (subsequent department) and credit Work in Process (prior department)
  5. e. None of these.

To determine

What entry made, to record transfer of cost from a prior to subsequent process

Explanation

Transfer-in Cost:

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

d.

When cost is transferred from prior process to subsequent process, work in process of subsequent department is debited because it increases the cost of subsequent process. In the entry, work in process of prior process should be credited because, due to the transfer, the cost of prior department will decrease. Therefore, option d. is correct.

a.

Finished goods are debited and work in process is credited at the time of completion of process...

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