Chapter 3, Problem 4PSA

Process Cost Summary:

It is a report which shows all the processes to produce the product and cost associated with each process. It also shows the equivalent unit of production.

Equivalent Unit of Production:

It shows the number of product produced with the manufacturer at the end of a particular time frame. At the end of the period, a manufacturer can have fully completed and partially completed product, it show all the product as equivalent fully completed product.

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.

1.

To determine

To prepare: Process cost summary.

2.

To determine

To prepare: Journal entry.

3.

To determine

To identify: Two major estimates that determines the cost per equivalent unit.

b.

To determine

To explain: Bias by management for each management if management compensation is based on maintaining low inventory.