Question

Carpenter Entity (CE) incurred the following expenditures in producing a dinner table for sale to a furniture store: (10 points)

Purchase price of lumber	$100
Discount on purchase	10
Freight on purchase	25
Refundable purchase tax	5
After-sales warranty costs	5
Wages of carpenters	75
Wages of workshop supervisor	50
Workshop utilities	3
Wage of front office receptionist	15
Marketing costs	10

     

      Calculate the cost of the inventory and make the entry to record the inventory cost.

Answer 1

Solution:

Computation of cost of inventory
Particulars	Amount
Purchase price of lumber	$100.00
Less: Disount on purchase	-$10.00
Add: Freight on purchase	$25.00
Less: refundable purchase tax	-$5.00
Add: Wages of carpenters	$75.00
Add: Wages of workshop supervisor	$50.00
Add: Workshop utilities	$3.00
Total Cost of Inventory	$238.00

Journal Entry - Carpenter Entity
Particulars	Debit	Credit
Finished goods inventory Dr	$238.00
To Work In Process Inventory		$238.00
(To record inventory cost)