Concept explainers
Work in Process Inventory Account:
Work in process inventory account is asset accounts which show the balances of all partial produced products.
Raw Material Inventory Account:
Raw material inventory account is an asset account which show the balance of all those material which are not yet used to make a final product or work in progress.
Journal Entries:
It is a book of original entry. It records and summarizes financial transaction of an entity in chronological manner, generally according to dual aspect of accounting.
Accounting rules regarding journal entries:
- Balance increase when: Assets, losses and expenses get debited and liabilities, gains, and revenue get credited.
- Balance decrease when: Assets, losses and expenses get credited and liabilities, gains, and revenue get debited.
To prepare:
Explanation of Solution
Prepare journal entry.
- 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.
- 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.
- 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.
- 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
- 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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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, debit finished goods inventory account.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Raw Material Inventory | 250,000 | ||
Accounts payable | 250,000 | |||
(Being raw material inventory is purchased on credit ) |
Table (1)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Work in Process | 157,500 | ||
Raw Material Inventory | 157,500 | |||
(Being raw material directly used in production) |
Table (2)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Factory Overhead | 60,000 | ||
Raw Material Inventory | 60,000 | |||
(Being raw material indirectly used in production)) |
Table (3)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Work in Process | 780,000 | ||
Factory Wages Payable | 780,000 | |||
(Being direct labor expenses incurred during production ) |
Table (4)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Factory Overhead | 750,000 | ||
Factory Wages Payable | 750,000 | |||
(Being indirect labor expenses incurred during production ) |
Table (5)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Factory Wages Payable | 1,530,000 | ||
Cash | 1,530,000 | |||
(Being factory wages paid)) |
Table (6)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Factory Overhead | 87,000 | ||
Other Accounts | 87,000 | |||
(Being other indirect expenses incurred ) |
Table (7)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Work in Process | 897,000 | ||
Factory overhead | 897,000 | |||
(Being |
Table (8)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Finished Goods Inventory | 1,754,500 | ||
Work in Process | 1,754,500 | |||
(Being goods transferred from sewing to finished goods department ) |
Table (9)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | 2,500,000 | |||
Sales Revenue | 2,500,000 | |||
(Being goods sold on credit) |
Table (10)
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
May 31 | Cost of Goods Sold | 1,782,500 | ||
Finished Goods Inventory | 1,782,500 | |||
(Being cost of goods sold is recorded ) |
Table (11)
Prepare a schedule of cost of goods manufactured.
S Company |
|
Schedule for cost of goods manufactured |
|
For the month ended on May 31 |
|
Particulars |
Cost ($) |
Direct Materials Cost |
157,500 |
Direct Labor Cost |
780,000 |
Factor Overheads |
897,000 |
Total Cost |
1,834,500 |
Work in progress (beginning) |
435,000 |
Total Cost |
2,269,500 |
Less: Work in progress (ending) |
515,000 |
Total goods manufactured |
1,754,500 |
Table (12)
Hence, the total cost of goods manufactured is $1,754,500.
Prepare partial income statement.
S. Company |
||
Partial Income Statement |
||
For month ended May 31, 20XX |
||
Particulars |
Amount ($) |
Amount ($) |
Revenue: |
||
Sales Revenue |
2,500,000 |
|
Total Revenue |
2,500,000 |
|
Less: |
||
Cost of goods sold |
1,782,500 |
|
Total Expense |
1,782,500 |
|
Gross profit |
717,500 |
Hence, gross profit according to partial income statement is $717,500.
Want to see more full solutions like this?
Chapter 3 Solutions
Managerial Accounting + Connect Access Card
- Financial accounting questionarrow_forwardMarilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including these: 1. Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend in terms of actual dollar increases. 2. Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3. 3. Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3. 4. Based on her knowledge of economic conditions, she is aware that the effective interest rate on the company's line of credit for 20X4 was approximately 12 percent. The…arrow_forwardAnswer this question general accountingarrow_forward
- Need correct answer general Accountingarrow_forwardAbc general accountingarrow_forwardA firm sells 2,800 units of an item each year. The carrying cost per unit is $3.26 and the fixed costs per order are $74. What is the economic order quantity? (Please round units to the nearest whole number)arrow_forward
- The lockbox systemarrow_forwardHii expert please provide correct answer general Accountingarrow_forwardRequired information [The following information applies to the questions displayed below.] Hemming Company reported the following current-year purchases and sales for its only product. Date January 1 January 10 Activities Beginning inventory Sales March 14 July 30 March 15 October 5 October 26 Purchase Sales Purchase Sales 410 units 455 units Units Acquired at Cost 255 units @ $12.20 = @ $17.20 @ $22.20 Units Sold at Retail $ 3,111 210 units @ $42.20 = 7,052 350 units @ $42.20 10,101 430 units @ $42.20 Purchase Totals 155 units 1,275 units $27.20 = 4,216 $ 24,480 990 units Ending inventory consists of 50 units from the March 14 purchase, 80 units from the July 30 purchase, and all 155 units from the October 26 purchase. Using the specific identification method, calculate the following. a) Cost of Goods Sold using Specific Identification Available for Sale Cost of Goods Sold Ending Inventory Date Activity # of units Cost Per Unit # of units sold Cost Per Unit Cost of Goods Sold Ending…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education