Question

Chemical Company produces a product in two departments: (1) Mixing and (2) Finishing. The company uses a process cost accounting system.

(a) Purchased raw materials for $50,000 on account.

(b) Raw materials requisitioned for production were:

           Direct materials

                Mixing department                                $20,000

                Finishing department                               14,000

(c) Incurred labor costs of $69,000.

(d) Factory labor used:

           Mixing department                                     $44,000

           Finishing department                                    25,000

(e) Manufacturing overhead is applied to the product based on machine hours used in each department:

           Mixing department—300 machine hours at $30 per machine hour.

           Finishing department—500 machine hours at $20 per machine hour.

(f) Units costing $56,000 were completed in the Mixing Department and were transferred to the Finishing Department.

(g) Units costing $60,000 were completed in the Finishing Department and were transferred to finished goods.

(h) Finished goods costing $40,000 were sold on account for $55,000.

Instructions

Prepare the journal entries and Ledger (T) Accounts to record the preceding transactions for Oman Chemical Company.

Answer 1

	General Journal	Debit	Credit
a	Raw material inventory	$50,000
	Accounts payable		$50,000
b	Work in process-Mixing	$20,000
	Work in process-Finishing	14,000
	Raw material inventory		$34,000
c	Factory labor	$69,000
	Wages payable		$69,000
d	Work in process-Mixing	$44,000
	Work in process-Finishing	25,000
	Factory labor		$69,000
e	Work in process-Mixing (300*$30)	$9,000
	Work in process-Finishing (500*$20)	10,000
	Factory overhead		$19,000
f	Work in process-Finishing	$56,000
	Work in process-Mixing		$56,000
g	Finished goods inventory	$60,000
	Work in process-Finishing		$60,000
h	Accounts receivable	$55,000
	Sales		$55,000
	Cost of goods sold	$40,000
	Finished goods inventory		$40,000

2.

Raw material inventory	Work in process-Mixing
Beg.bal.	$0			Beg.bal	$0
a	50,000	$20,000	b	b	20,000	$56,000	f
		14,000	b	d	44,000
End.bal	$16,000			e	9,000
				End.bal	$17,000
Work in process-Finishing	Finished Goods Inventory
Beg.bal	$0			Beg.bal	$0
b	14,000	$60,000	g	g	60,000	$40,000	h
d	25,000
e	10,000			End.bal	$20,000
f	56,000
End.bal	$45,000
Cost of Goods Sold	Sales
Beg.bal	$0			Beg.bal		0
h	40,000					55,000	h
End.bal	$40,000			End.bal		$55,000