Question

2. Gibson Corporation uses process costing. A number of transactions that occurred in September are listed below. Required (3 Points): Prepare journal entries for each of these transactions. (1) Raw materials that cost $50,817 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials. (2) Direct labor costs of $42,908 are incurred, but not yet paid, in the Mixing Department. (3) Manufacturing overhead of $59,723 is applied in the Mixing Department using the department's predetermined overhead rate. (4) Units with a carrying cost of $128,992 finish processing in the Mixing Department and are transferred to the Drying Department for further processing. (5) Units with a carrying cost of $117,663 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse. (6) Finished goods with a carrying cost of $108,216 are sold on account for $149,500.

Answer 1

• All journal entries are in the sequence as stated in the question:

Accounts title	Debit	Credit
Work in Process - Mixing Department	$                             50,817.00
Material Inventory		$               50,817.00
(material withdrawn for processing)
Work in Process - Mixing Department	$                             42,908.00
Labor cost payable		$               42,908.00
(labor cost incurred)
Work in Process - Mixing Department	$                             59,723.00
Manufacturing Overhead		$               59,723.00
(overheads applied)
Work in Process-Drying Department	$                           128,992.00
Work in Process - Mixing Department		$             128,992.00
(units completed and transferred)
Finished Goods Inventory	$                           117,663.00
Work in Process-Drying Department		$             117,663.00
(units completed and transferred)
Accounts receivables	$                           149,500.00
Sales		$             149,500.00
(goods sold on account)
Cost of Goods Sold	$                           108,216.00
Finished Goods Inventory		$             108,216.00
(cost of merchandise sold)