Question

The following events took place at a manufacturing company for the current year:

(1) Purchased $95,000 in direct materials.

(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.

(3) Other manufacturing overhead was $107,000, excluding indirect labor.

(4) Transferred 80% of the materials to the manufacturing assembly line.

(5) Completed 65% of the Work-in-Process during the year.

(6) Sold 85% of the completed goods.

(7) There were no beginning inventories.

1. What is the value of the ending Work-in-Process Inventory?
2. Prepare the journal entries for (2) – (4) to record the items into the manufacturing cost system:

Answer 1

1.

Ending work in process inventory:

Beginning inventory	$0
Direct material ($95,000*80%)	76,000
Direct labor	56,000
Manufacturing overhead ($13,600+107,000)	120,600
Total manufacturing costs	252,600
Less: Transferred to finished goods ($252,600*65%)	(164,190)
Cost of ending work in process	$88,410

2.

	General Journal	Debit	Credit
2.	Work in process inventory	$56,000
	Wages payable		$56,000
	Manufacturing overhead	$13,600
	Wages payable		$13,600
3.	Manufacturing overhead	$107,000
	Other manufacturing overhead		$107,000
4.	Work in process inventory ($95,000*80%)	$76,000
	Raw material inventory		$76,000