Financial and Managerial Accounting (Looseleaf) (Custom Package)
Financial and Managerial Accounting (Looseleaf) (Custom Package)
6th Edition
ISBN: 9781259754883
Author: Wild
Publisher: MCG
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Chapter 16, Problem 1PSB

1.

(a)

To determine

To compute: Cost of transferred products form production to finished products.

1.

(a)

Expert Solution
Check Mark

Explanation of Solution

Given,
Opening work in process inventory is $156,000.
Production cost incurred during the month is $732,500.
Closing work in process inventory is $250,000.

Formula for calculation of cost of completed and transferred goods,

    [ CostofCompletedand TransferredGoods ]=[ OpeningWorkinProcessInventory +CostIncurredDuringtheMonth ClosingWorkinProcessInventory ]

Substitute, $156,000 foropening work in process inventory, $732,500 for production cost incurred during the month, and $250,000 forclosing work in process inventory.

    CostofCompletedandTransferredGoods=$156,000+$732,500$250,000 =$638,500

Hence, cost of completed and transferred goods is $638,500.

Working notes:

Calculation forproduction cost incurred during the month,

    Sewing cost incurred during the month=( Materialcost+Laborcost +Overheadcost ) =$120,000+$350,000+$262,500 =$732,500

(b)

To determine

To compute: Cost of goods sold.

(b)

Expert Solution
Check Mark

Explanation of Solution

Given,
Opening finished goods inventory is $160,000.
Completed and transferred goods are $638,500.
Closing finished goods inventory is $198,000.

Formula for calculation of cost of goods sold,

    CostofGoodsSold=( OpeningFinishedGoodsInventory +CompletedandTransferredgoods ClosingFinishedGoodsInventory )

Substitute, $160,000 foropening finished goods inventory, $638,500 for completed and transferred goods and $198,000 forclosing finished goods inventory.

    CostofCompletedandTransferredGoods=( $160,000+$638,500 $198,000 ) =$600,500

Hence, cost of goods sold is $600,500.

2.

To determine

To prepare: Journal entry.

2.

Expert Solution
Check Mark

Explanation of Solution

(a)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Raw Material Inventory 200,000
Accounts payable 200,000
(Beingraw 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.

(b)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Work in Process 120,000
Raw Material Inventory 120,000
(Beingraw 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.

(c)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Factory Overhead 42,000
Raw Material Inventory 42,000
(Beingraw 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.

(d)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Work in Process 350,000
Factory Wages Payable 350,000
(Beingdirect 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

(e)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Factory Overhead 50,000
Factory Wages Payable 50,000
(Beingindirect 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.

(f)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Factory Wages Payable 400,000
Cash 400,000
(Beingfactory 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.

(g)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Factory Overhead 170,500
Other Accounts 170,500
(Beingother indirect expenses incurred)

Table(7)

  • Factory overhead is an expense. Since, other overhead cost are indirect, it increases expense. Hence, debit factory overhead.
  • Other accounts are expense to the company. Since, expense reduces equity, other accounts is credited.

(h)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Work in Process 262,500
Factory overhead 262,500
(Beingfactory overhead cost applied )

Table(8)

  • 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.

(i)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Finished Goods Inventory 638,500
Work in Process 638,500
(Beinggoods transferred from sewing to finished goodsdepartment )

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

(j)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
June 30 Accounts receivable 1,000,000
Sales Revenue 1,000,000
(Beinggoods soldon 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 ($) Credit ($)
June 30 Cost of Goods Sold 600,500
Finished Goods Inventory 600,500
(Beingcost 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, credit finished goods inventory account.

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Chapter 16 Solutions

Financial and Managerial Accounting (Looseleaf) (Custom Package)

Ch. 16 - Prob. 6DQCh. 16 - Prob. 7DQCh. 16 - Prob. 8DQCh. 16 - Prob. 9DQCh. 16 - Prob. 10DQCh. 16 - Prob. 11DQCh. 16 - Prob. 12DQCh. 16 - 13. List the four steps in accounting for...Ch. 16 - 14. APPLE Companies such as Apple commonly...Ch. 16 - 15. GOOGLE Are there situations where Google can...Ch. 16 - Prob. 16DQCh. 16 - Process vs. job order operations C1 For each of...Ch. 16 - Prob. 2QSCh. 16 - Prob. 3QSCh. 16 - Physical flow reconciliation C2 The following...Ch. 16 - Prob. 5QSCh. 16 - Prob. 6QSCh. 16 - Prob. 7QSCh. 16 - Prob. 8QSCh. 16 - Prob. 9QSCh. 16 - Prob. 10QSCh. 16 - Prob. 11QSCh. 16 - Prob. 12QSCh. 16 - Prob. 13QSCh. 16 - Prob. 14QSCh. 16 - Prob. 15QSCh. 16 - Prob. 16QSCh. 16 - Prob. 17QSCh. 16 - Prob. 18QSCh. 16 - Prob. 19QSCh. 16 - Prob. 20QSCh. 16 - Prob. 21QSCh. 16 - Prob. 22QSCh. 16 - Prob. 23QSCh. 16 - Prob. 24QSCh. 16 - Prob. 25QSCh. 16 - Prob. 26QSCh. 16 - Process Cost Summary C3 Anheuser-Busch In Bev is...Ch. 16 - Prob. 1ECh. 16 - Prob. 2ECh. 16 - Prob. 3ECh. 16 - Prob. 4ECh. 16 - Prob. 5ECh. 16 - Prob. 6ECh. 16 - Prob. 7ECh. 16 - Prob. 8ECh. 16 - Prob. 9ECh. 16 - Prob. 10ECh. 16 - Prob. 11ECh. 16 - Prob. 12ECh. 16 - Exercise 16-13AFIFO: Completing a process cost...Ch. 16 - Prob. 14ECh. 16 - Prob. 15ECh. 16 - Exercise 16-16 Weighted average: Process cost...Ch. 16 - Prob. 17ECh. 16 - Prob. 18ECh. 16 - Prob. 19ECh. 16 - Prob. 20ECh. 16 - Prob. 21ECh. 16 - Prob. 22ECh. 16 - Prob. 23ECh. 16 - Prob. 24ECh. 16 - Prob. 25ECh. 16 - Prob. 26ECh. 16 - Exercise 16-27 Hybrid Costing System A2 Explain a...Ch. 16 - Prob. 1PSACh. 16 - Prob. 2PSACh. 16 - Prob. 3PSACh. 16 - Prob. 4PSACh. 16 - Problem 16-5AA FIFO: Process cost summary;...Ch. 16 - Prob. 6PSACh. 16 - Prob. 7PSACh. 16 - Prob. 1PSBCh. 16 - Prob. 2PSBCh. 16 - Prob. 3PSBCh. 16 - Problem 16-4B Weighted average: Process cost...Ch. 16 - Problem 16-5BA FIFO: Process cost summary;...Ch. 16 - Prob. 6PSBCh. 16 - Prob. 7PSBCh. 16 - Prob. 16SPCh. 16 - Prob. 16CPCh. 16 - Prob. 1GLPCh. 16 - Prob. 1BTNCh. 16 - Prob. 2BTNCh. 16 - Prob. 3BTNCh. 16 - Prob. 4BTNCh. 16 - Prob. 5BTNCh. 16 - Prob. 6BTNCh. 16 - Prob. 7BTNCh. 16 - Prob. 8BTNCh. 16 - Prob. 9BTN
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