In: Accounting
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 | $ |
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 |