Closing the Balances in The Variance Accounts at the End of the Year Yohan Compa

Question

Closing the Balances in The Variance Accounts at the End of the Year

Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end:

Unadjusted Cost of Goods Sold equals $1,550,000, unadjusted Work in Process equals $276,000, and unadjusted Finished Goods equals $280,000.

Required:

1. Assume that the ending balances in the variance accounts are immaterial and prepare the journal entries to close them to Cost of Goods Sold. Note: Close the variances with a debit balance first. If an amount box does not require an entry, leave it blank or enter "0".

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Companies must restate costs and inventories at the end of the year to actual cost. So, variance accounts must be closed out and their balances applied to Cost of Goods Sold (if immaterial) or prorated among Cost of Goods Sold, Work in Process, and Finished Goods.

What is the adjusted balance in Cost of Goods Sold after closing out the variances?

$

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Companies must restate costs and inventories at the end of the year to actual cost. So, variance accounts must be closed out and their balances applied to Cost of Goods Sold (if immaterial) or prorated among Cost of Goods Sold, Work in Process, and Finished Goods.

2. What if any ending balance in a variance account that exceeds $9,000 is considered material? (a) Close the immaterial variance accounts to Cost of Goods Sold. (b) Prorate the largest of the labor variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. (c) Prorate the largest of the material variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. The prime cost in Cost of Goods Sold is $1,060,000, the prime cost in Work in Process is $166,000, and the prime cost in Finished Goods is $133,000. If an amount box does not require an entry, leave it blank or enter "0".

Note: Round all interim calculations to three decimal places, and round your final answers to the nearest dollar. Adjust credit entry for rounding to ensure debits equal credits in journal entry.

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See Cornerstone 9.5.

What are the adjusted balances in Work in Process, Finished Goods, and Cost of Goods Sold after closing out all variances?

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See Cornerstone

Debit Credit Direct Materials Price Variance $13,850    Direct Materials Usage Variance $1,110     Direct Labor Rate Variance 830     Direct Labor Efficiency Variance $12,700    ? > C ?v2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMando?invoker=assignments&takeAssignmentSessionLocator;= assignment take&inprogress;=false CHAPTER 17 eBock Calculator Sall at Split-off or Procass Futher Dadision, Atarnativas, Ralavant Ccata 1. CEX17.01 ALGO 2. CEX 17.02 ALGO 3. CEX17.03 ALGO 4. CEX.17.04 ALGO 5. EK. 17.06 ALGO 6. EX.17.09 ALGO 7. EK.17.10 Bacram Chemicals Company processes a number of chemical compounds used in preducing industrial cleaning products.One compound is decomposed inco two chemicals: anderine and dafinol. The cost of processing one batch cf compound is s79,500, and the result is 5,600 gallons of anderine and 8,200 glons of dofincl. Betram Chemicals can se the anderine at split-off for $11.00 per gallon and the dofinol for $6.95 per callan. Alzernatively, the anderine can be processed further at a cost of $8.60 per gallon (of anderine) into cermine. It takes 4 gal lons of anderine for avery galon of cenmine. A gallon of cermine sells for $62 Requiredi 1, which alternative is more cost effective and by how much? D?NOT round interim calculations and, if required, round your anever to the neare, cent. Process it furtherby 2. What if the production of andenna into camina required addtonal purchasing and quality inspection activity? Every 530 gallons of ande ne that undergo further processing recure 19 more purchase order; at S9 ?2ch and 18 more quelity inspection hours at $28 each. Which alternative would be better and by how much? Do NOT round interim calculetions end, if required, round your answer to the nearest cent. Sell at split-off by PreviousNext Propress: 4/7 items 55gnment Soore: 25.71% Seve and Exit Submit Assignment for Grading O Type here to search 6-52 PM A18/2018 2

Explanation / Answer

1.

Adjusted balance in cost of goods sold = $1550000 + $26550 - $1940 = $1574610

2.

Working:

Account Titles Debit Credit Cost of goods sold 26550 Direct materials price variance 13850 Direct labor efficiency variance 12700 (Close variances with debit balance) Direct materials usage variance 1110 Direct labor rate variance 830 Cost of goods sold 1940 (Close variances with credit balance)

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