Question

Inventory has a debit balance of $48,700

Cost of inventory items:

Item 1001: 180 at $50

Item 1002: 200 at $80

Item 1003: 140 at $95

Item 1004: 52 at $200

Record the follwoing adjusting entries-

1.) The special order for K. Atkinson is 50% complete. (Cost of Goods Sold used to date = item 1002: 2 at $80 and item 1004: 1 at $200)

2.) You are working on a special order for T Courtway that is 80% complete. When done, you will charge $800 to customer. (Cost of Goods Sold = item1001: 1 at $50 and item1004: 1 at $200)

Answer 1

Transaction Account Titles and Explanation Debit 1) Work in process inventory $360 Materials inventory (To record material issued to production for Order-K. Atkinson) Credit [(2 units x $80) + (1 unit x $200)] $360 [(1 unit x $50) + (1 unit x $200)] Work in process inventory $250 Materials inventory (To record material issued to production for Order-T. Courtway) $250 Explanation: Material inventory is a current asset to the firm and so its normal balance is debit. When materials inventory is issued to production, it goes out from the inventory and so Materials Inventory account shall be credited by amount equals to cost of materials issued to production. Accordingly, for both the transactions, Materials Inventory account is credited. Work in process inventory is also a current asset to the firm and so its normal balance is debit. It represents cost of works started during the reporting period but it is not yet completed. As a result, all costs incurred during the process shall be accumulated to "Work in Process Inventory" account until the work gets completed and transferred to finished goods. So, for both the transactions, Work in process inventory account is debited by amount equals to value of materials issued to the production.