Chapter 3, Problem 26E

To determine

(a)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

a.	Raw Materials Inventory	52, 000
	Accounts Payable		52, 000

Answer to Problem 26E

$\$52,000$ is debited and credited with the same amount. Hence, the amount of raw material is payable on credit.

Explanation of Solution

Raw material inventory is the aggregate cost related to the commodities which is not utilized in the products yet. $\$52,000$ is the amount which is debited, while the account payable is credited with the $52000. We can say that raw material is purchased on credit of $\$52,000$.

To determine

(b)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

b.	Work-in Process Inventory	42, 000
	Raw Materials Inventory		42, 000

Answer to Problem 26E

Account is debited and credited with the amount of $\$42,000$. Hence, we can say that direct materials have been utilized in the production process.

Explanation of Solution

Work in progress is the aggregate cost which is involved with the commodities which is partially into the production process, but it is not the finished products yet. Work in progress is debited by $\$42,000$ and raw material account is credited with the same amount because direct materials are used for producing the products.

To determine

(c)

Concept introduction:

Process costing system is the accumulation total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

c.	Work-in Process Inventory	32, 000
	Factory Payroll Payable		32, 000

Answer to Problem 26E

$\$32,000$ is debited and credited with WIP account and account payable respectively.

Explanation of Solution

Work in progress has a credit balance of $\$32,000$ with a factory roll payable account and WIP is debited with $\$32,000$. It is now clear that $\$32,000$ is used during the production process.

To determine

(d)

Concept introduction:

Process costing system is the accumulation total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

d.	Factory Overhead	6, 000
	Factory Payroll Payable		6, 000

Answer to Problem 26E

The factory overheads of $\$6,000$ is debited against factory payroll payable which means the overhead are incurred and are to be paid.

Explanation of Solution

Factory overheads are the expenses other than direct material and labour. Hence, the factory overheads are debited and the amount is credited to factory payroll, which means the expenses for indirect labour is incurred and to be paid with the amount of $\$6,000$.

To determine

(e)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

e.	c	12, 000
	Cash		12, 000

Answer to Problem 26E

$\$12,000$ is paid as factory expenses.

Explanation of Solution

Factory payable is the amount which is paid to the employees at a specified date. Factory payable is debited, and cash account is credited with $\$12,000$ which means the expenses are paid.

To determine

(f)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

f.	Factory Overhead	10, 000
	Raw Materials Inventory		10, 000

Answer to Problem 26E

The factory overheads of $\$10,000$ is debited against raw material inventory which means the overhead are incurred.

Explanation of Solution

Factory overheads are the expenses other than direct material and labour. Hence, the factory overheads are debited and the amount raw material inventory is credited, which means the expenses for indirect material is incurred with the amount of $\$10,000$.

To determine

(g)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

g.	Factory Payroll Payable	38, 000
	Cash		38, 000

Answer to Problem 26E

$\$38,000$ is paid as factory expenses.

Explanation of Solution

Factory payable is the amount which is paid to the employees at a specified date. Factory payroll payable is debited, and cash account is credited with $\$38,000$ which means the expenses are paid in relation to factory payroll to the employees.

To determine

(h)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

h.	Work-in process Inventory	33, 600
	Factory overhead		33, 600

Answer to Problem 26E

Work in process is debited with $\$33,600$ and credited with factory overhead with the same amount.

Explanation of Solution

Work in process is the stage in which the finished goods are half converted and still in process. The amount which is $105\%$ of the direct labour cost is credited while work was in the process, i.e., $\$33,600$ is debited to the WIP accounts.

To determine

(i)

Concept introduction:

Process costing system is the accumulation of total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

i.	Finished Goods Inventory	88, 000
	Work-in process Inventory		88, 000

Answer to Problem 26E

The account of finished goods is debited and the account of work in process is credited with the amount of $\$88,000$.

Explanation of Solution

The finished account is the one in which the goods which are completed to sell to the buyer are transferred. So, the goods which are completed in processing is transferred from WIP to finished goods account with an amount of $\$88,000$.

To determine

(j)

Concept introduction:

Process costing system is the accumulation of the total cost of producing large number of similar units. Cost is accumulated with the large batch production at aggregate level.

To explain:

The following journal entry of process costing system.

j.	Accounts receivable	250, 000
	Sales		250, 000
	Cost of Goods Sold	100, 000
	Finished Goods Inventory		100, 000

Answer to Problem 26E

The receivables are debited, and sales account is credited with the amount of $\$250,000$. One more entry is passed in which the cost of goods sold is debited and finished goods account is credited with the amount of $\$100,000$.

Explanation of Solution

Receivables are the amount which is yet to be received from debtors for which goods have already been sold. Sales account has a credit balance of $\$250,000$ and receivables have the debit balance of $\$250,000$. Hence, it can be said that the sales are made on credit.

Finished products are the part of inventory which is produced but not sold in the market. Cost of goods sold has the debit balance of $\$100,000$ against credit to the account of finished goods which means cost is transferred from finished goods account making the accumulated cost with the amount of $\$100,000$.