Question

Entries for Process Cost System

Preston & Grover Soap Company manufactures powdered detergent. Phosphate is placed in process in the Making Department, where it is turned into granulars. The output of Making is transferred to the Packing Department, where packaging is added at the beginning of the process. On July 1, Preston & Grover Soap Company had the following inventories:

Finished Goods	$30,010
Work in Process—Making	11,660
Work in Process—Packing	15,200
Materials	6,590

Departmental accounts are maintained for factory overhead, which both have zero balances on July 1.

Manufacturing operations for July are summarized as follows:

a.	Materials purchased on account		$373,810
b.	Materials requisitioned for use:
		Phosphate—Making Department	$246,930
		Packaging—Packing Department	85,890
		Indirect materials—Making Department	9,660
		Indirect materials—Packing Department	3,460
c.	Labor used:
		Direct labor—Making Department	$176,410
		Direct labor—Packing Department	119,070
		Indirect labor—Making Department	34,160
		Indirect labor—Packing Department	61,240
d.	Depreciation charged on fixed assets:
		Making Department	$32,210
		Packing Department	26,600
e.	Expired prepaid factory insurance:
		Making Department	$6,100
		Packing Department	2,440
f.	Applied factory overhead:
		Making Department	$84,180
		Packing Department	93,010
g.	Production costs transferred from Making Department to Packing Department		$508,980
h.	Production costs transferred from Packing Department to Finished Goods		$801,050
i.	Cost of goods sold during the period		$803,980

Required:

1. Journalize the entries to record the operations, identifying each entry by letter. For a compound transaction, if an amount box does not require an entry, leave it blank.

Item	Account	Debit	Credit
a.
b.
c.
d.
e.
f.
g.
h.
i.

2. Compute the July 31 balances of the inventory accounts.

Materials	$
Work in Process—Making Department	$
Work in Process—Packing Department	$
Finished Goods	$

3. Compute the July 31 balances of the factory overhead accounts.

Factory Overhead—Making Department	$
Factory Overhead—Packing Department	$

Answer 1

1) Journal entries:
Date	Account titles and Explanations	Debit	Credit
1-Jul	Materials	373,810
	Accounts payable		373,810
	(materials bought on account)
2-Jul	WIP Making department	246,930
	WIP Packing department	85,890
	Factory OH - Making department	9,660
	Factory OH - Packing department	3,460
	Materials		345,940
	(materials issued for production)
31-Jul	WIP Making department	176,410
	WIP Packing department	119,070
	Factory OH - Making department	34,160
	Factory OH - Packing department	61,240
	Wages payable		390,880
	(labor cost incurred)
31-Jul	Factory OH - Making department	32,210
	Factory OH - Packing department	26,600
	Accumulated depreciation-Factory		58,810
	(depreciation for the month)
31-Jul	Factory OH - Making department	6,100
	Factory OH - Packing department	2,440
	Prepaid insurance		8,540
	(Expired insurance)
31-Jul	WIP Making department	84,180
	WIP Packing department	93,010
	Factory OH - Making department		84,180
	Factory OH - Packing department		93,010
	(OH applied to production)
31-Jul	WIP Packing department	508,980
	WIP Making department		508,980
	(transfer of production)
31-Jul	Finished goods	801,050
	WIP Packing department		801,050
	(finished goods transferred)
31-Jul	Cost of goods sold	803,980
	Finished goods		803,980
	(cost of goods sold accounted)

2) July 31, Inventory balances:
	Materials	WIP	WIP	Finished
		Making	Packing	goods
Beginning balance	6,590	11,660	15,200	30,010
Debit	373,810	507,520	806,950	801,050
Credit	345,940	508,980	801,050	803,980
Ending balance	34,460	10,200	21,100	27,080
3) FOH Account balances as on July 31:	FOH	FOH
	Making	Packing
	Department	Department
Beginning balance	0	0
Debit	82,130	93,740
Credit	84,180	93,010
Ending balance	-2,050	730