The records of Tillman Corporation's initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs: Units Work-in-process inventory 48,000 Finished goods inventory 15,000 Unaudited Costs $ 242,880 105,300 As the auditor, you have learned the following information. Ending work-in-process inventory is 35 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 90 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information s also available: Beginning inventory (25% complete as to labor) Units started Current costs Units completed and transferred to finished goods inventory Units 32,000 118,000 102,000 Costs Direct Materials $116,640 436,860 Direct Labor $ 14,240 199,600 Required: a. Prepare a production cost report for Tillman using the weighted-average method. . Show the journal entry required to correct the difference between the unaudited records and actual ending balances of Work-in- Process Inventory and Finished Goods Inventory. Debit or credit Cost of Goods Sold for any difference. c. If the adjustment in requirement (b) is not made, will the company's income and inventories be overstated or understated?
The records of Tillman Corporation's initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs: Units Work-in-process inventory 48,000 Finished goods inventory 15,000 Unaudited Costs $ 242,880 105,300 As the auditor, you have learned the following information. Ending work-in-process inventory is 35 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 90 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information s also available: Beginning inventory (25% complete as to labor) Units started Current costs Units completed and transferred to finished goods inventory Units 32,000 118,000 102,000 Costs Direct Materials $116,640 436,860 Direct Labor $ 14,240 199,600 Required: a. Prepare a production cost report for Tillman using the weighted-average method. . Show the journal entry required to correct the difference between the unaudited records and actual ending balances of Work-in- Process Inventory and Finished Goods Inventory. Debit or credit Cost of Goods Sold for any difference. c. If the adjustment in requirement (b) is not made, will the company's income and inventories be overstated or understated?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ht.12.
Transcribed Image Text:The records of Tillman Corporation's initial and unaudited accounts show the following ending inventory balances, which must be
adjusted to actual costs:
Units
Work-in-process inventory 48,000
Finished goods inventory 15,000
Unaudited
Costs
$ 242,880
105,300
As the auditor, you have learned the following information. Ending work-in-process inventory is 35 percent complete with respect to
conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 90
percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information
is also available:
Beginning inventory (25% complete as to labor)
Units started
Current costs
Units completed and transferred to finished goods
inventory
Units
32,000
118,000
102,000
Costs
Direct Materials
$116,640
436,860
Direct Labor
$ 14,240
199,600
Required:
a. Prepare a production cost report for Tillman using the weighted-average method.
b. Show the journal entry required to correct the difference between the unaudited records and actual ending balances of Work-in-
Process Inventory and Finished Goods Inventory. Debit or credit Cost of Goods Sold for any difference.
c. If the adjustment in requirement (b) is not made, will the company's income and inventories be overstated or understated?
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