Inventory: It refers to the total stock of such goods or items which are held by the business organizations with the purpose of sale. Free on board (FOB): It refers to the term of sales, which states who will be liable for the risk related to the damage of goods in transit. This liability can be of seller or buyer, depends upon the condition. The types of free board are: Free on board (FOB) shipping point Free on board (FOB) destination FOB shipping point: In free on board (FOB) shipping point, ownership of goods transferred from seller to buyer with the transfer of goods to the goods carrier. FOB destination: In free on board (FOB) destination, the ownership and risk related to goods to be sold will remain with the seller till the date on which consignment will be actually received by the buyer. To determine: The correct amount of inventory of W Company on December 31.

Question

Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $7,000, direct labor of $3,400, and applied overhead of $2,890. Custom Cabinetry applies overhead at the rate of 85% of direct labor cost. During July, Job 120 is sold (on credit) for $26,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of July. Custom Cabinetry incurs the following costs during July. Job 120 Direct materials used Direct labor used $ 2,300 3,400 Job 121 $ 7,100 4,700 Job 122 $ 2,600 3,700 1. Prepare journal entries for the following July transactions and events a through e. a. Direct materials used. b. Direct labor used. c. Overhead applied. d. Sale of Job 120. e. Cost of goods sold for Job 120. Hint. Job 120 has costs from June and July. 2. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory accounts. (There were no jobs in Finished Goods Inventory at June…

Answer 1

Question

Chapter 6, Problem 1E

To determine

Inventory: It refers to the total stock of such goods or items which are held by the business organizations with the purpose of sale.

Free on board (FOB): It refers to the term of sales, which states who will be liable for the risk related to the damage of goods in transit. This liability can be of seller or buyer, depends upon the condition.

The types of free board are:

Free on board (FOB) shipping point

Free on board (FOB) destination

FOB shipping point: In free on board (FOB) shipping point, ownership of goods transferred from seller to buyer with the transfer of goods to the goods carrier.

FOB destination: In free on board (FOB) destination, the ownership and risk related to goods to be sold will remain with the seller till the date on which consignment will be actually received by the buyer.

To determine: The correct amount of inventory of W Company on December 31.

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