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	$29,030
Work in Process—Making	11,280
Work in Process—Packing	14,700
Materials	6,370

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		$361,550
b.	Materials requisitioned for use
		Phosphate—Making Department	$238,830
		Packaging—Packing Department	83,070
		Indirect materials—Making Department	9,350
		Indirect materials—Packing Department	3,350
c.	Labor used
		Direct labor—Making Department	$170,630
		Direct labor—Packing Department	115,170
		Indirect labor—Making Department	33,040
		Indirect labor—Packing Department	59,240
d.	Depreciation charged on fixed assets
		Making Department	$31,150
		Packing Department	25,720
e.	Expired prepaid factory insurance
		Making Department	$5,900
		Packing Department	2,360
f.	Applied factory overhead
		Making Department	$81,420
		Packing Department	89,960
g.	Production costs transferred from Making Department to Packing Department		$492,300
h.	Production costs transferred from Packing Department to Finished Goods		$774,790
i.	Cost of goods sold during the period		$777,620

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. If required, use the minus sign to indicate a credit balance.

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

Answer 1

1.

Item	Account	Debit	Credit
a.	Materials	361550
	Accounts Payable		361550
	(To record materials purchased on account)
b.	Work in process-Making department	238830
	Work in process-Packing department	83070
	Factory overhead-Making department	9350
	Factory overhead-Packing department	3350
	Materials		334600
	(To materials requisitioned)
c.	Work in process-Making department	170630
	Work in process-Packing department	115170
	Factory overhead-Making department	33040
	Factory overhead-Packing department	59240
	Wages expense		378080
	(To record labor used)
d.	Factory overhead-Making department	31150
	Factory overhead-Packing department	25720
	Accumulated depreciation		56870
	(To record depreciation on fixed assets)
e.	Factory overhead-Making department	5900
	Factory overhead-Packing department	2360
	Prepaid insurance		8260
	(To record expired prepaid factory insurance)
f.	Work in process-Making department	81420
	Work in process-Packing department	89960
	Factory overhead-Making department		81420
	Factory overhead-Packing department		89960
	(To record factory overhead applied)
g.	Work in process-Packing department	492300
	Work in process-Making department		492300
	(To record trasfer from making to packing department)
h.	Finished goods	774790
	Work in process-Packing department		774790
	(To record transfer from packing to finished goods)
i.	Cost of goods sold	777620
	Finished goods		777620
	(To record the cost of goods sold)

2. July 31 balances:

Materials	$       33,320
Work in process-Making department	$         9,860
Work in process-Packing department	$       20,410
Finished goods	$       26,200

Working:

Materials = $6370 + $361550 - $334600 = $33320

Work in process-Making department = $11280 + $238830 + $170630 + $81420 - $492300 = $9860

Work in process-Packing department = $14700 + $83070 + $115170 + $89960 + $492300 - $774790 = $20410

Finished goods = $29030 + $774790 - $777620 = $26200

3. July 31 balances:

Factory overhead-Making department	$         1,980	Credit
Factory overhead-Packing department	$ 710	Debit

Working:

Factory overhead-Making department = $9350 + $33040 + $31150 + $5900 - $81420 = -$1980

Factory overhead-Packing department = $3350 + $59240 + $25720 + $2360 - $89960 = $710