Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter 3, Problem 3CP

1.

To determine

To prepare: Journal entry.

1.

Expert Solution
Check Mark

Explanation of Solution

(a)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Raw Material Inventory 125,000
Accounts payable 125,000
(Beingraw material inventory is purchased on credit )

Table(8)

  • 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 ($) Credit ($)
Work in Process 52,440
Factory Overhead 10,000
Raw Material Inventory 62,440
(Beingraw material directly and indirectly used in production)

Table(9)

  • 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.
  • 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.

(c)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Work in Process 202,250
Factory Overhead 25,000
Factory Wages Payable 227,250
(Beingdirect labor expenses incurred during production )

Table(10)

  • Work in process is an asset. Since, labor is used to manufacture, it increases work in process. Hence, debit work in process account.
  • 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

(d)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Factory Wages Payable 227,250
Cash 227,250
(Beingfactory wages paid))

Table(11)

  • 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.

(e)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Factory Overhead 80,000
Cash 80,000
(Beingfactory overhead paid in cash)

Table(12)

  • Factory overhead is an expense. Since, expense reduces equity, debit factory overhead account.
  • Cash is an asset. Since, cash is used to pay liability, it decreases asset. Hence, debit cash account.

(f)

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Work in Process 101,125
Factory overhead 101,125
(Beingfactory overhead cost applied )

Table(13)

  • 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.

2.

To determine

To prepare: Process cost summary.

2.

Expert Solution
Check Mark

Explanation of Solution

Prepare production cost summary:

M.L.B. Company-Production Department

Process Cost Summary (weighted average method)

For the month ended May 31, 20XX

Particulars

Amount

($)

Amount

($)

Cost charged to Production

Cost of work in process (beginning)

Direct materials

2,660

Conversion

5,475

8,135

Cost incurred this period

Direct materials

52,440

Conversion

303,375

355,815

Total cost

363,950

Unit Information

Units

Units

Units to account for:

Units accounted for

Work in process (beginning)

5,000

Completed and transferred units

11,000

Unit started this period

14,000

Work in process (ending)

8,000

Total units to account for

19,000

Total units accounted for

19,000

Equivalent Unit of Production

Direct Materials

Conversion

Completed and transferred units

11,000

11,000

Work in process (ending)

8,000

3,200

Equivalent Unit of Production

19,000

14,200

Cost per EUP

Cost of work in process (beginning)

2,660

5,475

Cost incurred this period

52,440

303,375

Total cost

$55,100

$308,850

Equivalent unit of production

19,000

14,200

Cost per EUP

$2.9

$21.75

Cost Assignment and Reconciliation

Amount

($)

Amount

($)

Cost of completed and transferred units

Direct materials

31,900

Conversion

239,250

271,150

Cost of work in process (ending)

Direct materials

23,200

Conversion

69,600

92,800

Total cost

363,950

Table(14)

Hence, total cost of transferred goods and work in process (ending) is $271,150 and $92,800 respectively.

Working notes:

Calculation for EUP (direct material),

    CostperEUP(DirectMaterial)= TotalCost EquivalentUnitofProduction = $55,100 19,000 =$2.9

Calculation for EUP (Conversion),

    CostperEUP(Conversion)= TotalCost EquivalentUnitofProduction = $308,850 14,200 =$21.75

3.

To determine

To prepare: Journal entry.

3.

Expert Solution
Check Mark

Explanation of Solution

g.

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Finished Goods Inventory 271,150
Work in Process 2,71,150
(Being goods transferred from production to finished goodsdepartment )

Table(15)

  • 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 production to finished goods department, it decreases work in process account. Hence, credit work in process account.

h.

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Cash 625,000
Sales Revenue 625,000
(Beinggoods soldon credit)

Table(16)

  • Cash is an asset. Since, sales have taken place, but money is received. Hence, debit cash 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 ($) Credit ($)
Cost of Goods Sold 265,700
Finished Goods Inventory 265,700
(Beingcost of goods sold is recorded )

Table(17)

  • 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, debit finished goods inventory account.

4.

To determine

To prepare: Ledger account.

4.

Expert Solution
Check Mark

Explanation of Solution

Raw Material Inventory
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
July 1 Balance b/f 25,000 25,000
Cash 125,000 150,000
Work in process 52,440
Factory overhead 10,000 87,560

Table(18)

The ending balance is $87,560.

Work in Process Inventory
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
July 1 Balance b/f
Direct material 2,660
Conversion 5,475 8,125
Raw material inventory 52,440 60,565
Factory wages payable 202,500 263,065
Factory overhead 101,125 364,190
Finished goods inventory 271,150 93,040

Table(19)

The ending balance is $93,040.

Finished Goods Inventory
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
July 1 Balance b/f 110,000 110,000
Work in process 271,150 381,150
Cost of goods sold 265,700 115,450

Table(20)

The ending balance is $115,450.

Sales
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
Cash 625,000 625,000

Table(21)

The ending balance is $625,000.

Cost of Goods Sold
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
Finished goods inventory 265,700 265,700

Table(22)

The ending balance is $265,700.

Factory Wages Payable
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
Work in process 202,250 202,250
Factory overhead 25,000 227,250
Cash 227,250 0

Table(23)

The ending balance is $0.

Factory Overhead
Date Account Title and Explanation Post ref Debit ($) Credit ($) Balance ($)
Raw material inventory 10,000 10,000
Factory wages payable 25,000 35,000
Cash 80,000 80,000
Work in process 101,125 23,875

Table(24)

The ending balance is $23,875.

5.

To determine

To compute: Gross profit.

5.

Expert Solution
Check Mark

Explanation of Solution

Given,
Sales are $625,000.
Costs of goods sold are $265,700.

Formula to calculate gross profit,

    Grossprofit=SalesCostofgoodssold

Substitute $625,000 for sales and $265,700 for cost of goods sold in the above formula.

    Grossprofit=$625,000$265,700 =$359,300

Hence, gross profit of the firm is $359,300.

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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
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