Question

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments—Refining and Blending. Raw materials are introduced at various points in the Refining Department. The following incomplete Work in Process account is available for the Refining Department for March: Work in Process—Refining Department March 1 balance 33,700 Completed and transferred to Blending ? Materials 146,600 Direct labor 81,200 Overhead 490,000 March 31 balance ? The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,700; direct labor, $4,900; and overhead, $21,100. Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $17,700; and overhead cost applied to production, $111,000. Required: 1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. Key your entries to the items (a) through (g) below.A. Raw materials used in production. B. Direct labor costs incurred.C. Manufacturing overhead costs incurred for the entire factory, $636,000. (Credit Accounts Payable.)D. Manufacturing overhead was applied to production using a predetermined overhead rate.E. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $632,000.F. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $720,000.G. Completed units were sold on account, $1,310,000. The Cost of Goods Sold was $600,000. 2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Refining Department’s Work in Process is given in the T-account shown above.) Raw materials $ 212,600 Work in process—Blending Department $ 58,000 Finished goods $ 27,000

Answer 1

WORK IN PROGRESS – REFINING DEPARTMENT
March 1 Balance	33,700	Completed & Transferred to blending	?
Materials	146,600
Direct Labor	81,200
Overhead	490,000
		March 31	?

Cost incurred during the month in Blending department:

Materials: $45,000

Direct labor: $17,700

Overhead: $111,000

Journal Entries in the books of Lubricants Inc.

Event	Particulars	Debit ($)	Credit ($)
1 A	Raw Material used in production:
	Work in Progress- Refining Department	146,600
	Work in Progress- Blending Department	45,000
	To Raw Material		191,600
1 B	Direct labor cost incurred
	Work in Progress- Refining Department	81,200
	Work in Progress- Blending Department	17,700
	To Salaries and wages payable		98,900
1 C	Manufacturing Overhead cost incurred for the entire factory
	Manufacturing Overhead	636,000
	To Accounts Payable		636,000
1 D	Manufacturing Overhead applied to production
	Work in Progress- Refining Department	490,000
	Work in Progress- Blending Department	111,000
	To Manufacturing Overhead		601,000

1 E	Completed units transferred from refining to blending
	Work in progress – blending department	632,000
	To Work in progress – refining department		632,000
1 F	Completed units transferred from blending to finished goods
	Finished Goods	720,000
	To work in progress – blending department		720,000
1 G	Finished Goods Sold
	Accounts Receivable	1,310,000
	To Sales revenue		1,310,000
	Cost of goods sold	600,000
	To Finished goods		600,000

2.)

Posting of above entries to T- accounts

Raw Materials
Debit			Credit
Date	Particular	Amount in $	Date	Particular	Amount in $
Mar 1	Beginning Balance	212,600	1 A	Work in Progress- Refining Department	146,600
				Work in Progress- Blending Department	45,000
				Balance C/F	21,000
	TOTAL	212,600		TOTAL	212,600

Work in Progress – Blending Department
Debit			Credit
Date	Particular	Amount in $	Date	Particular	Amount in $
Mar 1	Beginning Balance	58,000	1 F	Finished Goods	720,000
1 A	Raw Material	45,000		Balance C/F	143,700
1 B	Salaries and wages payable	17,700
1 D	Manufacturing Overhead	111,000
1 E	Work in Progress- Refining Department	632,000
	TOTAL	863,700		TOTAL	863,700

Finished Goods
Debit			Credit
Date	Particular	Amount in $	Date	Particular	Amount in $
Mar 1	Beginning Balance	27,000	1 G	Cost of goods sold	600,000
1 F	work in progress – blending department	720,000		Balance C/F	147,000
	TOTAL	747,000		TOTAL	747,000