Question

Mocha Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000, respectively. Department 2 has transferred-in costs of $390,000 for the current period. In addition, work in process at the beginning of the period for Department 2 totaled $75,000, and work in process at the end of the period totaled $90,000. The journal entry to record the flow of costs into Department 3 during the period is

a.

Work in Process—Department 3               570,000

    Work in Process—Department 2                                         570,000

b.

Work in Process—Department 3               490,000

    Work in Process—Department 2                                         490,000

c.

Work in Process—Department 3               375,000

    Work in Process—Department 2                                         375,000

d.

Work in Process—Department 3               555,000

    Work in Process—Department 2                                         555,000

Answer 1

d. Work in Process - Department 3 (Dr) 555000

Work in Process - Department 2 (Cr) 555000

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Note : Computation of transfer from department-2 to department-3

(Direct Material of department-2 )+(Direct Labour of department-2 )+(Factory overhead of department-2)+(Transfer from department-1)+(Opening Stock of department-2)-(Closing Stock of department-2)

;That is

$50000+$60000+$70000+$390000+$75000-$90000 = $555000