Chapter 6, Problem 41P

1.

To determine

Calculate the equivalent units of transferred-in, direct materials and conversion using weighted average method.

Explanation of Solution

Equivalents units for production: Equivalents units are a measure of the work done during an accounting period. It includes the beginning and closing inventory of work in process and they also provide information relating to work on units that are completely processed during the period

Calculate the equivalent units of transferred-in, direct materials and conversion using weighted average method.

(Table 1)

2.

To determine

Compute the unit cost of transferred-in, direct materials and conversion department.

Explanation of Solution

Compute the unit cost of transferred-in, direct materials and conversion department.

(Table 2)

3.

To determine

Determine the amount goods completed and transferred out during July.

Explanation of Solution

Compute the amount goods completed and transferred out during July.

$\begin{array}{c}\begin{array}{l}\text{Amount of goods completed}\\ \text{ and transferred out during July}\end{array}\}=\left(\begin{array}{l}\text{Number of units completed }\\ \text{and transferred out}\end{array}\right)\times \left(\begin{array}{l}\text{Total cost per }\\ \text{equivalent unit}\end{array}\right)\\ \text{=27,000}\times \text{\$13}\text{.2180}\\ \text{=\$356,886}\end{array}$

Therefore, the amount goods completed and transferred out during July is $356,886.

4.

To determine

Calculate the cost of work in process for the month of July.

Explanation of Solution

Calculate the cost of work in process of transferred-in for the month of July.

$\begin{array}{c}\begin{array}{l}\text{Amount of ending}\\ \text{ WIP during July}\end{array}\}=\left(\begin{array}{l}\text{Numberof units at Ending }\\ \text{WIP in transferred -in }\end{array}\right)\times \left(\begin{array}{l}\text{Total cost per }\\ \text{equivalent unit of }\\ \text{transferred-in}\end{array}\right)\\ \text{=5,000}\times \text{\$6}\text{.2500}\\ \text{=\$31,250}\end{array}$

Therefore, the cost of work in process of transferred-in for the month July is $31,250.

Calculate the cost of work in process of conversion for the month of July.

$\begin{array}{c}\begin{array}{l}\text{Amount of ending}\\ \text{ WIP during July}\end{array}\}=\left(\begin{array}{l}\text{Numberof units at Ending }\\ \text{WIP in conversion }\end{array}\right)\times \left(\begin{array}{l}\text{Total cost per }\\ \text{equivalent unit of }\\ \text{conversion}\end{array}\right)\\ \text{=2,500}\times \text{\$4}\text{.7458}\\ \text{=\$11,865}\end{array}$

Therefore, the cost of work in process of conversion for the month July is $11,865.

5.

To determine

Prepare journal entry for the given transaction.

Explanation of Solution

Prepare journal entry to record the materials.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Work in process inventory	60,000
	Materials inventory		60,000
	(To record the direct materials)

(Table 3)

• Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory $60,000.
• Materials inventory is an asset and there is a decrease in the value of an asset. Hence, credit the materials inventory by $60,000.

Prepare journal entry to record the labor assuming that labor is 50% of conversion cost.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Work in process inventory (1)	55,000
	Accrued payroll		55,000
	(To record the direct materials)

(Table 4)

• Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory $55,000
• Accrued payroll is an expense and there is an increase in the value of equity. Hence, credit accrued payroll by $55,000.

Prepare journal entry to record the overhead.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Work in process inventory	55,000
	Factory overhead		55,000
	(To record factory overhead costs applied to production of the period)

(Table 5)

• Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory account with $55,000.
• Factory overhead (Expense) is a component of stockholder’s equity and there is a decrease value of expense. Hence, credit the factory overhead account by $55,000.

Prepare journal entry to record the finished product.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Finished goods inventory	356,886
	Work in process inventory		356,886
	(To transfer cost of jobs completed to  finished goods inventory)

(Table 6)

• Finished goods inventory is an asset and there is an increase in the value of an asset. Hence, debit the finished goods inventory account with $356,886.
• Work in process inventory is an asset and there is a decrease in the value of an asset. Hence, credit the work in process inventory account with $356,886.

Working notes:

1. Calculate the amount of labor cost.

$\begin{array}{c}\text{Cost of labor = Cost of conversion}\times \left(\begin{array}{l}\text{Percentage of labor }\\ \text{in conversion}\end{array}\right)\\ =\$110,000\times 50\%\\ =\$55,000\end{array}$