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:

The following incomplete Work in Process account is available for the Refining Department for March:

Work in Process—Refining Department

March 1 balance	34,000		Completed and transferred        to Blending	?
Materials	141,600
Direct labor	70,200
Overhead	486,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,000; direct labor, $4,700; and overhead, $21,300.

Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $17,600; and overhead cost applied to production, $102,000.

Required:

1.	Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

a.	Raw materials were issued for use in production.
b.	Direct labor costs were incurred.
c.	Manufacturing overhead costs for the entire factory were incurred, $636,000. (Credit Accounts Payable.)
d.	Manufacturing overhead cost 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, $682,000.
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, $1,450,000. The Cost of Goods Sold was $660,000.

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 account is given on the prior page.)

Raw materials	$	210,600
Work in process—Blending Department	$	53,000
Finished goods	$	20,000

After posting the entries to the T-accounts, find the ending balance in the inventory accounts and the manufacturing overhead account.

Answer 1

1.

Transactions	General Journal	Debit	Credit
a.	Work in process-Refining department	141600
	Work in process-Blending department	46000
	Raw Materials		187600
	(To record direct materials used in production)
b.	Work in process-Refining department	70200
	Work in process-Blending department	17600
	Salaries and Wages payable		87800
	(To record direct labor costs incurred)
c.	Manufacturing overhead	636000
	Accounts Payable		636000
	(To record manufacturing overhead incurred)
d.	Work in process-Refining department	486000
	Work in process-Blending department	102000
	Manufacturing overhead		588000
	(To record manufacturing overhead applied)
e.	Work in process-Blending department	682000
	Work in process-Refining department		682000
	(To record transfers from Refining to Blending department)
f.	Finished goods	720000
	Work in process-Blending department		720000
	(To record goods completed and transferred to finished goods)
g.(1)	Accounts receivable	1450000
	Sales		1450000
	(To record sales on account)
g.(2)	Cost of goods sold	660000
	Finished goods		660000
	(To record cost of sales)

2.

Accounts Receivable					Raw Materials
	Debit	Credit				Debit	Credit
g.(1)	1450000				Beg. Bal.	210600
							187600	a.
End. Bal.	1450000				End. Bal.	23000
Work in Process-Refining Department					Work in Process-Blending Department
	Debit	Credit				Debit	Credit
Beg. Bal.	34000				Beg. Bal.	53000
a.	141600	682000	e.		a.	46000	720000	f.
b.	70200				b.	17600
d.	486000				d.	102000
					e.	682000
End. Bal.	49800				End. Bal.	180600
Finished Goods					Manufacturing Overhead
	Debit	Credit				Debit	Credit
Beg. Bal.	20000				c.	636000	588000	d.
f.	720000	660000	g.(2)
End. Bal.	80000				End. Bal.	48000
Accounts Payable					Salaries and Wages Payable
	Debit	Credit				Debit	Credit
		636000	c.				87800	b.
End. Bal.		636000			End. Bal.		87800
Sales					Cost of Goods Sold (COGS)
	Debit	Credit				Debit	Credit
		1450000	g.(1)		g.(2)	660000
End. Bal.		1450000			End. Bal.	660000