The journal entry to record the direct materials cost added in July would include A debit to work-in-process inventory (Department 2) for $425,000 A debit to work-in-process inventory (Department 2) for $400,000 No entry would be required A debit to raw materials inventory for $400,000 The journal entry to record the transferred-in cost added in July would include A debit to work-in-process inventory (Department 2) for $220,000 No entry would be required A debit to work-in-process inventory (Department 1) for $200,000 A debit to work-in-process inventory (Department 2) for $200,000 Test Company uses a normal, process costing system to determine product cost. The company uses the first-in, first-out (FIFO) method to account forequivalent units and costs in beginning work-in-process.The product passes through two departments: Department 1 and Department 2. In Department 2, all direct materials are added at the beginning of theprocess. The following information is available for Department 2 in July.Work-in-process, July 1UnitsCostsDirect materialsConversion costTransferred-in costJuly activityUnitsTransferred inCompleted and transferred outCosts addedDirect materialsConversion costTransferred-in-costPercentage of completionWork-in-process, July 1Work-in-process July 315,000 units$25,00016,00020,00050,000 units45,000 units$400,000184,000200,00060%40%

Under Process costing, prior department's costs are considered to be similar to Direct materials…

Answered: Test Company uses a normal, process…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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The journal entry to record the direct materials cost added in July would include

		A debit to work-in-process inventory (Department 2) for $425,000
		A debit to work-in-process inventory (Department 2) for $400,000
		No entry would be required
		A debit to raw materials inventory for $400,000

The journal entry to record the transferred-in cost added in July would include

		A debit to work-in-process inventory (Department 2) for $220,000
		No entry would be required
		A debit to work-in-process inventory (Department 1) for $200,000
		A debit to work-in-process inventory (Department 2) for $200,000

Test Company uses a normal, process costing system to determine product cost. The company uses the first-in, first-out (FIFO) method to account for
equivalent units and costs in beginning work-in-process.
The product passes through two departments: Department 1 and Department 2. In Department 2, all direct materials are added at the beginning of the
process. The following information is available for Department 2 in July.
Work-in-process, July 1
Units
Costs
Direct materials
Conversion cost
Transferred-in cost
July activity
Units
Transferred in
Completed and transferred out
Costs added
Direct materials
Conversion cost
Transferred-in-cost
Percentage of completion
Work-in-process, July 1
Work-in-process July 31
5,000 units
$25,000
16,000
20,000
50,000 units
45,000 units
$400,000
184,000
200,000
60%
40%

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