A firm produces its products by a continuous process involving two production de

Question

A firm produces its products by a continuous process involving two production departments, 1 and 2. Present entries to record the following selected transactions related to production during August:

(a)

Materials purchased on account, $180,000.

(b)

Material requisitioned for use in Department 1, $125,700, of which $124,200 entered directly into the product.

(c)

Labor cost incurred in Department 1, $195,400, of which $174,000 was used directly in the manufacture of the product.

(d)

Factory overhead costs for Department 1 incurred on account, $52,700.

(e)

Depreciation on machinery in Department 1, $29,200.

(f)

Expiration of prepaid insurance chargeable to Department 1, $7,000.

(g)

Factory overhead applied to production, $105,300.

(a)

Materials purchased on account, $180,000.

(b)

Material requisitioned for use in Department 1, $125,700, of which $124,200 entered directly into the product.

(c)

Labor cost incurred in Department 1, $195,400, of which $174,000 was used directly in the manufacture of the product.

(d)

Factory overhead costs for Department 1 incurred on account, $52,700.

(e)

Depreciation on machinery in Department 1, $29,200.

(f)

Expiration of prepaid insurance chargeable to Department 1, $7,000.

(g)

Factory overhead applied to production, $105,300.

Explanation / Answer

Solution.

S.No. Particulars Debit ($) Credit ($) (a) Raw Materials Dr. 180000 To Bank 180000 (being Raw Materials purchased) (b) Work In Process- Department 1 Dr. 124200 To Raw Materials 124200 (being raw materials introduced in Dept. 1) Manufacturing Overheads Dr. 1500 To Raw Materials 1500 (being indirect materials charged as overheads) (c) Work In Process- Department 1 Dr. 174000 To Wages Payable 174000 (being direct labor charged) Manufacturing Overheads Dr. 21400 To Wages Payable 21400 (being indirect wages charged as manufacturing overheads) (d) Work In Process- Department 1 Dr. 75600 To Manufacturing Overheads
(52700+21400+1500) 75600 (being manufacturing incurred for Dept 1) (e) Work In Process- Department 1 Dr. 29200 To Depreciation on Machinery 29200 (Depreciation on machinery for dept 1) (f) Insurance Expense Dr. 7000 To Prepaid Insurance 7000 (being prepaid insurance expired) Work In Process- Department 1 Dr. 7000 To Insurance Expense 7000 (being insurance expense for Dept 1 charged) (g) Work In Process- Department 1 Dr. 105300 To Manufacturing Overheads 105300 (being factory overheads applied)

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