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	$7,010
Work in Process—Making	2,720
Work in Process—Packing	3,550
Materials	1,540

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		$87,320
b.	Materials requisitioned for use
		Phosphate—Making Department	$57,680
		Packaging—Packing Department	20,060
		Indirect materials—Making Department	2,260
		Indirect materials—Packing Department	810
c.	Labor used
		Direct labor—Making Department	$41,210
		Direct labor—Packing Department	27,820
		Indirect labor—Making Department	7,980
		Indirect labor—Packing Department	14,310
d.	Depreciation charged on fixed assets
		Making Department	$7,520
		Packing Department	6,210
e.	Expired prepaid factory insurance
		Making Department	$1,430
		Packing Department	570
f.	Applied factory overhead
		Making Department	$19,670
		Packing Department	21,730
g.	Production costs transferred from Making Department to Packing Department		$118,900
h.	Production costs transferred from Packing Department to Finished Goods		$187,130
i.	Cost of goods sold during the period		$187,820

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.
b.
c.
d.
e.
f.
g.
h.
i.

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	$
Factory Overhead—Packing Department	$

Answer 1

Item	Account				Debit	Credit
a.	Materials				87,320
	Accounts payable					87,320
b.	work in process-Making Deptt				57,680
	work in process-pcking Deptt				20,060
	Factory overhead -making Deptt				2,260
	Factory overhead -packing Deptt				810
	Materials					80,810
c.	work in process-Making Deptt				41,210
	work in process-pcking Deptt				27,820
	Factory overhead -making Deptt				7,980
	Factory overhead -packing Deptt				14,310
	Wages payable					91,320
d.	Factory overhead -making Deptt				7,520
	Factory overhead -packing Deptt				6,210
	Accumulated Depreciation					13,730
e	Factory overhead -making Deptt				1,430
	Factory overhead -packing Deptt				570
	prepaid insurance					2,000
f.	work in process-Making Deptt				19,670
	work in process-pcking Deptt				21,730
	Factory overhead -making Deptt					19,670
	Factory overhead -packing Deptt					21,730
g.	work in process-packing department				118,900
	work in process-making department					118,900
h.	finished goods				187,130
	work in process-packing department					187,130
i.	cost of goods sold				187,820
	finished goods					187,820
2)
	materials				8,050
	work in process -Making Department				2,380
	work in process-Packing Department				4,930
	finished goods				6,320
	t-Accounts
	materials
	opening	1,540	Requistioned		80,810
	purchases	87,320
	end bal	8,050
	work in process-making deptt
	opening	2,720
	DM	57,680	trfg -packing deptt		118,900
	DL	41,210
	OH applied	19,670
	end bal	2,380
	work in process-pcking deptt
	opening	3,550
	trfd making	118,900
	DM	20,060	finished goods		187,130
	DL	27,820
	OH applied	21,730
	end bal	4,930
	finished goods
	opening	7,010	cost of goods sold		187,820
	WIP-packing	187,130
	end bal	6,320
3)
	Factory overhea-making department				480	Credit
	Factory overhead -packing department				470	Debit
	Factory overhead-making department
	indirect mt	2,260	WIP		19,670
	ind lab	7,980
	dep	7,520
	prepaid	1,430
			end bal		480
	Factory overhead-packing department
	indirect mt	810	WIP		21,730
	ind lab	14,310
	dep	6,210
	prepaid	570
	end bal	470