Entries for Process Cost System Preston & Grover Soap Company manufactures powde
ID: 2436431 • Letter: E
Question
Entries for Process Cost System
Preston & Grover Soap Company manufactures powdered detergent. Phosphate is placed in process in the Making Department, where it is turned into granulars. The output of Making is transferred to the Packing Department, where packaging is added at the beginning of the process. On July 1, Preston & Grover Soap Company had the following inventories:
Finished Goods $23,370
Work in Process—Making 9,080
Work in Process—Packing 11,840
Materials 5,130
Departmental accounts are maintained for factory overhead, which both have zero balances on July 1.
Manufacturing operations for July are summarized as follows:
a. Materials purchased on account $291,080
b. Materials requisitioned for use
Phosphate—Making Department $192,280
Packaging—Packing Department 66,880
Indirect materials—Making Department 7,520
Indirect materials—Packing Department 2,700
c. Labor used
Direct labor—Making Department $137,370
Direct labor—Packing Department 92,720
Indirect labor—Making Department 26,600
Indirect labor—Packing Department 47,690
d. Depreciation charged on fixed assets
Making Department $25,080
Packing Department 20,710
e. Expired prepaid factory insurance
Making Department $4,750
Packing Department 1,900
f. Applied factory overhead
Making Department $65,550
Packing Department 72,430
g. Production costs transferred from Making Department to Packing Department $396,340
h. Production costs transferred from Packing Department to Finished Goods $623,770
i. Cost of goods sold during the period $626,050
Required:
1. Journalize the entries to record the operations, identifying each entry by letter. For a compound transaction, if an amount box does not require an entry, leave it blank.
Explanation / Answer
1) Journal Entries (Amounts in $)
2) Calculation of July 31 balances of inventory accounts.
Materials = Beg. bal+Materials purchased - Materials requisitioned for use
= $5,130+$291,080-$269,380 = $26,830
Work in Process- Making Department
= Beg. bal+Materials+Labor+Factory OH applied - Tfd to Packing dept.
= $9,080+$192,280+$137,370+$65,550-$396,340 = $7,940
Work in Process-Packing Department
= Beg. bal+Materials+Labor+Factory OH applied+Tfd from Making dept.-Tfd to F. Goods
= $11,840+$66,880+$92,720+$72,430+$396,340-$623,770 = $16,440
Finished Goods = Beg. bal+Tfd from Packing dept.-Tfd to COGS
= $23,370+$623,770-$626,050 = $21,090
3) Calculation of July 31 balances of the factory overhead accounts
Factory Overhead-Making Dept.
= Indirect materials+Indirect labor+Depreciation+Insurance-Applied Factory Overhead
= $7,520+$26,600+$25,080+$4,750-$65,550 = ($1,600) Credit
Factory Overhead-Packing Dept.
= Indirect materials+Indirect labor+Depreciation+Insurance-Applied Factory Overhead
= $2,700+$47,690+$20,710+$1,900-$72,430 = $570 Debit
Item Account Debit Credit a. Materials 291,080 Accounts Payable 291,080 b. Work in Process-Making Department 192,280 Work in Process-Packing Department 66,880 Factory Overhead-Making Department 7,520 Factory Overhead-Packing Department 2,700 Materials (192,280+66,880+7,520+2,700) 269,380 c. Work in Process-Making Department 137,370 Work in Process-Packing Department 92,720 Factory Overhead-Making Department 26,600 Factory Overhead-Packing Department 47,690 Wages Payable (137,370+92,720+26,600+47,690) 304,380 d. Factory Overhead-Making Department 25,080 Factory Overhead-Packing Department 20,710 Accumulated Depreciation (25,080+20,710) 45,790 e. Factory Overhead-Making Department 4,750 Factory Overhead-Packing Department 1,900 Prepaid Insurance (4,750+1,900) 6,650 f. Work in Process-Making Department 65,550 Work in Process-Packing Department 72,430 Factory Overhead-Making Department 65,550 Factory Overhead-Packing Department 72,430 g. Work in Process-Packing Department 396,340 Work in Process-Making Department 396,340 h. Finished Goods 623,770 Work in Process-Packing Department 623,770 i. Cost of Goods Sold 626,050 Finished Goods 626,050
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