Managerial Accounting
Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
bartleby

Videos

Question
Book Icon
Chapter 3, Problem 1PSA

1.

(a)

To determine

To compute: Cost of transferred products form production to finished products.

1.

(a)

Expert Solution
Check Mark

Explanation of Solution

Given,
Opening work in process inventory is $435,000.
Production cost incurred during the month is $1,834,500.
Closing work in process inventory is $515,000.

Formula for calculation of cost of completed and transferred goods,

    [ CostofCompletedand TransferredGoods ]=[ OpeningWorkinProcessInventory +CostIncurredDuringtheMonth ClosingWorkinProcessInventory ]

Substitute, $435,000 foropening work in process inventory, $1,834,500 for Production cost incurred during the month, and $515,000 forclosing work in process inventory.

    CostofCompletedandTransferredGoods=$435,000+$1,834,500$515,000 =$1,754,500

Hence, cost of completed and transferred goods is $1,754,500.

Working note:

Calculation forproduction cost incurred during the month,

    Sewing cost incurred during the month=( Materialcost+Laborcost +Overheadcost ) =$157,500+$780,000+$897,000 =$1,834,500

(b)

To determine

To compute: Cost of goods sold.

(b)

Expert Solution
Check Mark

Explanation of Solution

Given,
Opening finished goods inventory is $633,000.
Completed and transferred goods is $1,754,500
Closing finished goods inventory is $605,000.

Formula for calculation of cost of goods sold,

    CostofGoodsSold=( OpeningFinishedGoodsInventory +CompletedandTransferredgoods ClosingFinishedGoodsInventory )

Substitute, $633,000 foropening finished goods inventory, $1,754,500for completed and transferred goodsand $605,000 forclosing finished goods inventory.

    CostofGoodsSold=$633,000+$1,754,500$605,000 =$1,782,500

Hence, cost of goods sold is $1,782,500.

2.

To determine

To prepare: Journal entry.

2.

Expert Solution
Check Mark

Explanation of Solution

(a)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Raw Material Inventory 250,000
Accounts Payable 250,000
(Beingraw material inventory is purchased on credit )

Table(1)

  • 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.

(b)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Work in Process 157,500
Raw Material Inventory 157,500
(Beingraw material directly used in production)

Table(2)

  • 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.

(c)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Factory Overhead 60,000
Raw Material Inventory 60,000
(Beingraw material indirectly used in production))

Table(3)

  • 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.

(d)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Work in Process 780,000
Factory Wages Payable 780,000
(Beingdirect labor expenses incurred during production )

Table(4)

  • 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

(e)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Factory Overhead 750,000
Factory Wages Payable 750,000
(Beingindirect labor expenses incurred during production )

Table(5)

  • 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

(f)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Factory Wages Payable 1,530,000
Cash 1,530,000
(Beingfactory wages paid))

Table6)

  • 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.

(g)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Factory Overhead 87,000
Other Accounts 87,000
(Beingother indirect expenses incurred )

Table(7)

  • 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.

(h)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Work in Process 897,000
Factory overhead 897,000
(Beingfactory overhead cost applied )

Table(8)

  • 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.

(i)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Finished Goods Inventory 1,754,500
Work in Process 1,754,500
(Beinggoods transferred from sewing to finished goodsdepartment )

Table(9)

  • 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.

(j)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Accounts receivable 2,500,000
Sales Revenue 2,500,000
(Beinggoods soldon credit)

Table(10)

  • 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.
Date Account Title and Explanation Post ref Debit ($) Credit ($)
May 31 Cost of Goods Sold 1,782,500
Finished Goods Inventory 1,782,500
(Beingcost of goods sold is recorded )

Table(11)

  • 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, credit finished goods inventory account.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 3 Solutions

Managerial Accounting

Ch. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Direct labor costs Flow through what accounts in a...Ch. 3 - Prob. 10DQCh. 3 - Prob. 11DQCh. 3 - Prob. 12DQCh. 3 - 13. List the four steps in accounting for...Ch. 3 - 14. APPLE Companies such as Apple commonly...Ch. 3 - 15. GOOGLE Are there situations where Google can...Ch. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - Prob. 19DQCh. 3 - Process vs. job order operations C1 For each of...Ch. 3 - Prob. 2QSCh. 3 - Prob. 3QSCh. 3 - Physical flow reconciliation C2 The following...Ch. 3 - Prob. 5QSCh. 3 - Prob. 6QSCh. 3 - Prob. 7QSCh. 3 - Prob. 8QSCh. 3 - Prob. 9QSCh. 3 - Prob. 10QSCh. 3 - Prob. 11QSCh. 3 - Prob. 12QSCh. 3 - Prob. 13QSCh. 3 - Prob. 14QSCh. 3 - Prob. 15QSCh. 3 - Prob. 16QSCh. 3 - Prob. 17QSCh. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - Prob. 21QSCh. 3 - Prob. 22QSCh. 3 - Prob. 23QSCh. 3 - Prob. 24QSCh. 3 - Prob. 25QSCh. 3 - Prob. 26QSCh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Prob. 8ECh. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Exercise 16-13AFIFO: Completing a process cost...Ch. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Exercise 16-16 Weighted average: Process cost...Ch. 3 - Prob. 17ECh. 3 - Prob. 18ECh. 3 - Prob. 19ECh. 3 - Prob. 20ECh. 3 - Prob. 21ECh. 3 - Prob. 22ECh. 3 - Prob. 23ECh. 3 - Prob. 24ECh. 3 - Prob. 25ECh. 3 - Prob. 26ECh. 3 - Prob. 1PSACh. 3 - Prob. 2PSACh. 3 - Prob. 3PSACh. 3 - Prob. 4PSACh. 3 - Problem 16-5AA FIFO: Process cost summary;...Ch. 3 - Prob. 6PSACh. 3 - Prob. 7PSACh. 3 - Prob. 1PSBCh. 3 - Prob. 2PSBCh. 3 - Prob. 3PSBCh. 3 - Problem 16-4B Weighted average: Process cost...Ch. 3 - Problem 16-5BA FIFO: Process cost summary;...Ch. 3 - Prob. 6PSBCh. 3 - Prob. 7PSBCh. 3 - Prob. 3SPCh. 3 - Prob. 3CPCh. 3 - Prob. 1GLPCh. 3 - Prob. 1AACh. 3 - Prob. 2AACh. 3 - Prob. 3AACh. 3 - Prob. 1BTNCh. 3 - Prob. 2BTNCh. 3 - Prob. 3BTNCh. 3 - Prob. 4BTNCh. 3 - Prob. 5BTNCh. 3 - Prob. 6BTN
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Job Cost Sheet - Job Cost Accounting System; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=ElD8nKNXE1I;License: Standard Youtube License