Question

Problem 8-50 Prepare a Production Cost Report and Adjust Inventory Balances: Weighted-Average Method (LO 8-3, 4) The records of Fremont Corporation’s initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs. Units Unaudited Costs Work-in-process inventory 215,000 $ 818,897 Finished goods inventory 26,000 366,250 As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available. Costs Units Direct Materials Direct Labor Beginning inventory (80% complete as to labor) 93,000 $ 435,600 $ 524,000 Units started 590,000 Current costs 1,750,000 2,246,000 Units completed and transferred to finished goods inventory 468,000 Required: a. Prepare a production cost report for Fremont using the weighted-average method. (Hint: You will need to calculate equivalent units for three categories: materials, labor, and overhead.) (Round "Cost per equivalent unit" to 2 decimal places.)

DETAILS Total Costs Materials Labor Overhead Costs to be accounted for: Costs in beginning WIP inventory $435,600 $524,000    ? Current period costs 1,750,000 2,246,000     ? Total costs to be accounted for $0 $2,185,600 $2,770,000 ? Cost per equivalent unit: Materials $3.20 Labor $5.00 Overhead ? Costs accounted for: Costs assigned to units transferred out: Materials $1,497,600 $1,497,600 Labor 2,340,000 2,340,000 Overhead ? Total costs of units transferred out $3,837,600 Costs assigned to ending WIP inventory: Materials 688,000 688,000 Labor 430,000 430,000 Overhead ? Total ending WIP inventory $1,118,000 Total costs accounted for $4,955,600 $2,185,600 $2,770,000 $0

Journal entry worksheet

• Record the difference between the unaudited records and actual ending balances of Work-in-Process Inventory and Finished Goods Inventory.

Note: Enter debits before credits.

	Event General Journal Debit Credit 1 Work in process Finished goods Cost of goods sold

c. If the adjustment in requirement (b) is not made, will the company’s income and inventories be overstated or understated?

	Income would have been Work in process would have been Finished goods would have been

Answer 1

>requirement 1

DETAILS
	Total Costs	Materials	Labor	Overhead
Costs to be accounted for:
Costs in beginning WIP inventory	$1,378,800	$435,600	$524,000	$419,200 [524000 x 80%]
Current period costs	$5,792,800	$1,750,000	$2,246,000	$1,796,800 [2246000 x 80%]
Total costs to be accounted for	$7,171,600	$2,185,600	$2,770,000	$2,216,000
Cost per equivalent unit:
Materials		$                           3.20
Labor			$              5.00
Overhead				$                              4.00
Costs accounted for:
Costs assigned to units transferred out:
Materials	$1,497,600	$1,497,600
Labor	$2,340,000		$2,340,000
Overhead	$1,872,000			$1,872,000
Total costs of units transferred out	$5,709,600	$1,497,600	$2,340,000	$1,872,000
Costs assigned to ending WIP inventory:
Materials	$688,000	$688,000
Labor	$430,000		$430,000
Overhead	$344,000			$344,000
Total ending WIP inventory	$1,462,000	$688,000	$430,000	$344,000
Total costs accounted for	$7,171,600	$2,185,600	$2,770,000	$2,216,000

>Requirement 2

Event	General Journal	Debit	Credit
1	Work in process [1462000 - 818897]	$643,103
	Finished goods ( 366250 - (26000 x [3.2 + 5 +4])		$49,050
	Cost of goods sold		$594,053

>Requirement 3

Income would have been	Understated, because Cost of Goods Sold would have been more.
Work in process would have been	Understated
Finished goods would have been	Overstated