Question

Zhang Corporation uses process costing. A number of transactions that occurred in June are listed below.

  

(1)	Raw materials that cost $38,900 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials.
(2)	Direct labor costs of $36,900 are incurred, but not yet paid, in the Mixing Department.
(3)	Manufacturing overhead of $42,900 is applied in the Mixing Department using the department's predetermined overhead rate.
(4)	Units with a carrying cost of $112,900 finish processing in the Mixing Department and are transferred to the Drying Department for further processing.
(5)	Units with a carrying cost of $144,400 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse.
(6)	Finished goods with a carrying cost of $138,900 are sold.

  

Answer 1

Process costing is used when similar kind of products are produced in larger quantities.

The Journal entries for the given transactions are:

No.	General Journal	Debit	Credit
1	Work in Progress - Mixing Department	38,900
	Raw Materials		38,900
	To record the Material issued to use in the Mixing Department
2	Work in Process - Mixing Department	36,900
	Salaries and Wages Payable		36,900
	To record the Direct labor costs incurred, but not yet paid, in the Mixing Department
3	Work in Process - Mixing Department	42,900
	Manufacturing Overhead		42,900
	To record the Manufacturing overhead applied in Mixing Department
4	Work in Process - Drying Department	112,900
	Work in Process - Mixing Department		112,900
	To record the units finished processing in the Mixing Department and transfer to the Drying Department
5	Finished Goods	144,400
	Work in Process - Drying Department		144,400
	To record the units finished processing in the Drying Department and are transferred as finished goods
6	Cost of Goods Sold	138,900
	Finished Goods		138,900
	To record the sales of Finished goods