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	$27,800
Work in Process—Making	10,800
Work in Process—Packing	14,080
Materials	6,100

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		$346,230
b.	Materials requisitioned for use
		Phosphate—Making Department	$228,710
		Packaging—Packing Department	79,550
		Indirect materials—Making Department	8,950
		Indirect materials—Packing Department	3,210
c.	Labor used
		Direct labor—Making Department	$163,400
		Direct labor—Packing Department	110,290
		Indirect labor—Making Department	31,640
		Indirect labor—Packing Department	56,730
d.	Depreciation charged on fixed assets
		Making Department	$29,830
		Packing Department	24,630
e.	Expired prepaid factory insurance
		Making Department	$5,650
		Packing Department	2,260
f.	Applied factory overhead
		Making Department	$77,970
		Packing Department	86,150
g.	Production costs transferred from Making Department to Packing Department		$471,440
h.	Production costs transferred from Packing Department to Finished Goods		$741,960
i.	Cost of goods sold during the period		$744,670

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.	Materials
	Accounts Payable
b.	Work in Process-Making Department
	Work in Process-Packing Department
	Factory Overhead-Making Department
	Factory Overhead-Packing Department
	Materials
c.	Work in Process-Making Department
	Work in Process-Packing Department
	Factory Overhead-Making Department
	Factory Overhead-Packing Department
	Wages Payable
d.	Factory Overhead-Making Department
	Factory Overhead-Packing Department
	Accumulated Depreciation
e.	Factory Overhead-Making Department
	Factory Overhead-Packing Department
	Prepaid Insurance
f.	Work in Process-Making Department
	Work in Process-Packing Department
	Factory Overhead-Making Department
	Factory Overhead-Packing Department
g.	Work in Process-Packing Department
	Work in Process-Making Department
h.	Finished Goods
	Work in Process-Packing Department
i.	Cost of Goods Sold
	Finished Goods

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	$	Credit
Factory Overhead—Packing Department	$	Debit

Feedback

1. Remember that there are three different types of inventory; materials, work in process, and finished goods. Each department has a work in process account to track the costs that were accumulated in that department.

2 and 3. Set up T accounts to help determine the balances from the transactions above.

Answer 1

1.

Event	Account Title	Debit	Credit
a	Raw material	346230
	Accounts Payable		346230
b	Work-in-process - Making Dept.	228710
	Work-in-process - Packing Dept.	79550
	Factory Overhead - Making Dept.	8950
	Factory Overhead - Packing Dept.	3210
	Raw Material		320420
c	Work-in-process - Making Dept.	163400
	Work-in-process - Packing Dept.	110290
	Factory Overhead - Making Dept.	31640
	Factory Overhead - Packing Dept.	56730
	Wages Payable		362060
d	Factory Overhead - Making Dept.	29830
	Factory Overhead - Packing Dept.	24630
	Accumulated Depreciation		54460
e	Factory Overhead - Making Dept.	5650
	Factory Overhead - Packing Dept.	2260
	Prepaid Insurance		7910
f	Work-in-process - Making Dept.	77970
	Work-in-process - Packing Dept.	86150
	Factory Overhead - Making Dept.		77970
	Factory Overhead - Packing Dept.		86150
g	Work-in-process - Packing Dept.	471440
	Work-in-process - Making Dept.		471440
h	Finished goods	741960
	Work-in-process - Packing Dept.		741960
i	Cost of goods sold	744670
	Finished goods		744670

2.

Materials	31910
Work-in-process - Making Department	9440
Work-in-process - Packing Department	19550
Finished goods	25090

3.

Factory overhead - Making Department	$1,900	Credit
Factory overhead - Packing Department	$680	Debit

T-accounts

Raw Material					Work-in-process - Making Dept.
Event	Debit	Credit	Event		Event	Debit	Credit	Event
Beg.Bal.	6100	320420	b		Beg.Bal.	10800	471440	g
a	346230				b	228710
					c	163400
					f	77970
	352330	320420				480880	471440
End.Bal.	31910				End.Bal.	9440
Work-in-process - Packing Dept.					Finished Goods
Event	Debit	Credit	Event		Event	Debit	Credit	Event
Beg.Bal.	14080	741960	h		Beg.Bal.	27800	744670	i
b	79550				h	741960
c	110290
f	86150					769760	744670
g	471440				End.Bal.	25090
	761510	741960
End.Bal.	19550
Factory Overhead - Making Dept.					Factory Overhead - Packing Dept.
Event	Debit	Credit	Event		Event	Debit	Credit	Event
b	8950	77970	f		b	3210	86150	f
c	31640				c	56730
d	29830				d	24630
e	5650				e	2260
	76070	77970				86830	86150
End.Bal.	-1900				End.Bal.	680
Cost of goods sold
Event	Debit	Credit	Event
i	744670