Question

Hornsby has a single production department, and uses a process-costing system. The balance in its Work-in-Process account on January 1 was $68,000. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hornsby should make a journal entry on December 31 that includes:

A) a credit to Work-in-Process Inventory for $86,000.

B) a debit to Work-in-Process Inventory for $432,000

C) a debit to Cost of Goods Sold for $432,000.

D) a debit to Finished-Goods Inventory for $432,000.

E) a debit to Finished-Goods Inventory for $86,000.

Answer 1

Work in process inventory, beginning = $68,000

Direct materials, direct labor and manufacturing overhead charged to work in process = $450,000

Work in process inventory,ending = $86,000

Cost of work in process transferred to finished goods = Work in process, beginning+Direct materials, direct labor and manufacturing overhead charged to work in process-Work in process ,ending

= 68,000+450,000-86,000

= $432,000

The following journal entry will be made to transfer work in process to finished goods:

Date	General journal	Debit	Credit
December 31	Finished goods inventory	$432,000
	Work in process inventory		$432,000

D) a debit to Finished-Goods Inventory for $432,000.

Correct option is D.

Kindly comment if you need further assistance.

Thanks