Question

In December, Davis Company had the following cost flows:

	Molding Department	Grinding Department	Finishing Department
Direct materials	$112,200	$30,300	$17,800
Direct labor	8,500	14,000	12,000
Applied overhead	8,800	60,700	10,800
Transferred-in cost:
From Molding		129,500
From Grinding			234,500
Total cost	$129,500	$234,500	$275,100

	Required:
1.	Prepare the journal entries to transfer costs from (a) Molding to Grinding, (b) Grinding to Finishing, and (c) Finishing to Finished Goods.
2.	CONCEPTUAL CONNECTION: Explain how the journal entries differ from a job-order cost syste

Answer 1

Solution 1:

Journal Entries - Davis Company
S. No.	Particulars	Debit	Credit
a	Work In Process - Grinding Department Dr	$129,500.00
	To Work In Process - Molding Department		$129,500.00
	(Being work completed by molding department transferred to Grinding Department)
b	Work In Process - Finishing Department Dr	$234,500.00
	To Work In Process - Grinding Department		$234,500.00
	(Being work completed by Grinding department transferred to Finishing Department)
c	Finished Goods Inventory Dr	$275,100.00
	To Work In Process - Finishing Department		$275,100.00
	(Being work completed by finishing department transferred to finished goods inventory)

Solution 2:

In job order cost system, we prepared WIP account for each separate job rather than each department. Until job is not completed, cost related to that job remains in WIP and once job is completed same is transferred to finished inventory by debiting finished inventory and crediting WIP account of particular job.