Question

FosterFoster Company manufactures cell phones and uses JIT costing. The standard unit cost of $47 is composed of $25 direct materials and $22 conversion costs. Raw materials purchased on account during June totaled $4,320,000. Actual conversion costs totaled $3,600,000. Foster completed 120,000 cell phones in June and sold 96,000 on account. The sales price is $46 each.

Requirement 1. Journalize these transactions. ?(Record debits? first, then credits. Exclude explanations from any journal?entries.)

?(a) Purchase of raw materials on account.

Date			Accounts	Debit	Credit
(a)

?(b) Actual conversion costs.

Date			Accounts	Debit	Credit
(b)

?(c) Completed 120,000 cell phones.

Date			Accounts	Debit	Credit
(c)

?(d) Sold 96,000 cell phones on account.

Start by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date			Accounts	Debit	Credit
(d)

Now journalize the expense related to the sales.

Date			Accounts	Debit	Credit
(d)

Requirement 2. Prepare a? T-account for the Conversion Costs account. Were conversion costs underallocated or?overallocated? Explain your? answer, and then make the entry to adjust the Conversion Costs account.

Begin by preparing the? T-account for the Conversion Costs account. Key applicable transactions by transaction letter and calculate the ending balance. Label the ending balance with

Bal.

Review the journal entries you prepared in Requirement 1.

Conversion costs
		~mohbal

Conversion costs were overallocated underallocated. Actual costs exceeded were lower than the costs allocated to inventory.

Now make the entry to adjust the Conversion Costs account. ?(Record debits? first, then credits. Exclude explanations from any journal? entries.)

Date			Accounts	Debit	Credit
(e)

Requirement 3. What is the ending balance of the Raw and? In-Process Inventory account if the beginning balance was? zero? How much Cost of Goods Sold did Foster have in June after making any necessary? adjustments? Begin by preparing the? T-account for the Raw and? In-Process Inventory account. Key applicable transactions by transaction letter and calculate the ending balance. Label the ending balance with

Bal.

Review the journal entries you prepared in Requirement 1.

Raw and In-Process Inventory
		~mohbal

Review the journal entries you prepared in Requirement 1 and 2.

Foster Company's Cost of Goods Sold in June after making any necessary adjustments was $

Answer 1

Answer 1 , 2 and 3					T Account -Conversion Costs
					b	Cash	$3,600,000.00		Work in process Inventory	$2,640,000.00
Date	Account Title	Debit	Credit					e	Cost of goods sold	$768,000.00
a	Raw material Inventory	$4,320,000.00						e	Finished Goods Inventory	$192,000.00
	Accounts Payable		$4,320,000.00				$3,600,000.00			$3,600,000.00
b	Conversion Costs	$3,600,000.00			T Account -Raw Material Inventory
	Cash		$3,600,000.00			Accounts Payable	$4,320,000.00		Work in process inventory	$3,000,000.00
c	Finished Goods Inventory	$5,640,000.00							Ending balance	$1,320,000.00
	Work in process Inventory		$5,640,000.00				$4,320,000.00			$4,320,000.00
d-1	Accounts Receivables	$4,416,000.00			T Account -Work in process Inventory
	Sales		$4,416,000.00			Raw Material Inventory	$3,000,000.00		Finished Goods Inventory	$5,640,000.00
						Conversion Costs	$2,640,000.00
d-2	Cost of good sold	$4,512,000.00
	Finished Goods Inventory		$4,512,000.00				$5,640,000.00			$5,640,000.00
e	Cost of goods sold	$768,000.00
	Finished Goods Inventory	$192,000.00
	Conversion Costs		$960,000.00
Foster Company's Cost of Goods Sold in June after making any necessary adjustments was = $45,12,000 + $7.68,000 = $52,80,000