Question

Cost Flows Through Journal Entries

The Mixing Department performs a series of processes in which a fluid chemical is concentrated. Records indicate that the Mixing Department has been charged with $51,200 of direct labor costs. The manufacturing overhead rate is 150% of direct labor costs. Beginning work in process was $179,200, and ending work in process totaled $27,200. One- half of this period's completed products is sold on account at a price equal to 160% of its cost.

Prepare journal entries to record (1) various costs charged to the Mixing Department this period, (2) transfer of this period's completed product, and (3) sale of one-half of this period's production.

Answer 1

Journal Entries :-

S.No.	Particulars	Debit($)	Credit($)
1	Work in Process Inventory A/c	51200
	Factory Labor Cost A/c		51200
	(Being Record Direct Labor Costs)
1(a)	Work In Process Inventory A/c	76800
	Manufacturing Overhead A/c ($51200*150%)		76800
	(Being Record Manufacturing Overhead)
2	Finished Goods A/c*	280000
	Work in Process Inventory A/c		280000
	(Being Record Completed Production)
3	Cost of Goods Sold A/c	140000
	Finished Goods A/c ($280000/2)		140000
	(Being Record Cost of Goods Sold)
3(a)	Accounts Receivable A/c	224000
	Sales Revenue A/c ($140000*160%)		224000
	(Being Record Credit Sale)

* Finished Goods = Beginning Work in Process + Factory Labor Cost + Manufacturing Overhead -

Ending Work in Process

= $179200 + $51200 + $76800 - $27200

= $280000

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