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	$22,510
Work in Process—Making	8,750
Work in Process—Packing	11,400
Materials	4,940

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		$280,360
b.	Materials requisitioned for use:
		Phosphate—Making Department	$185,200
		Packaging—Packing Department	64,420
		Indirect materials—Making Department	7,250
		Indirect materials—Packing Department	2,600
c.	Labor used:
		Direct labor—Making Department	$132,310
		Direct labor—Packing Department	89,300
		Indirect labor—Making Department	25,620
		Indirect labor—Packing Department	45,930
d.	Depreciation charged on fixed assets:
		Making Department	$24,160
		Packing Department	19,950
e.	Expired prepaid factory insurance:
		Making Department	$4,580
		Packing Department	1,830
f.	Applied factory overhead:
		Making Department	$63,140
		Packing Department	69,760
g.	Production costs transferred from Making Department to Packing Department		$381,740
h.	Production costs transferred from Packing Department to Finished Goods		$600,790
i.	Cost of goods sold during the period		$602,990

Required:

1. Journalize the entries to record the operations, identifying each entry by letter. If an amount box does not require an entry, leave it blank.

Item	Account	Debit	Credit
a.
b.
c.
d.
e.
f.
g.
h.
i.

2. Compute the July 31 balances of the inventory accounts.

Materials	$
Work in Process—Making Department	$
Work in Process—Packing Department	$
Finished Goods	$

3. Compute the July 31 balances of the factory overhead accounts. If required, use the minus sign to indicate a credit balance.

Factory Overhead—Making Department	$
Factory Overhead—Packing Department	$

Answer 1

Preston & Grover Soap Company
S.No.	General,Journal	Debit	Credit
1a)	Materials	$                                  2,80,360.00
	To Accounts Payable		$                                   2,80,360.00
	(Being amount of Materials purchased on account)
1b)	Work in Process-Making Department	$                                  1,85,200.00
	Work in Process-Packing Department	$                                      64,420.00
	Factory Overhead-Making Department	$                                        7,250.00
	Factory Overhead-Packing Department	$                                        2,600.00
	To Materials		$                                   2,59,470.00
	(Being amount of Materials transferred to Work inProcess making and packing department ,Factory Overhead-Making and Packing Department)
1c )	Work in Process-Making Department	$                                  1,32,310.00
	Work in Process-Packing Department	$                                      89,300.00
	Factory Overhead-Making Department	$                                      25,620.00
	Factory Overhead-Packing Department	$                                      45,930.00
	To Wages Payable		$                                   2,93,160.00
	(Being amount of Wages Payable transferred to Work inProcess making and packing department ,Factory Overhead-Making and Packing Department)
1d)	Factory Overhead-Making Department	$                                      24,160.00
	Factory Overhead-Packing Department	$                                      19,950.00
	To Accumulated Depreciation		$                                       44,110.00
	(Being amount of Accumulated Depreciation transferred to Factory Overhead -Making and Packing Department)
1e)	Factory Overhead-Making Department	$                                        4,580.00
	Factory Overhead-Packing Department	$                                        1,830.00
	To Prepaid Insurance		$                                         6,410.00
	(Being amount of Prepaid Insurance transferred to Factory Overhead-Making and Packing Department)
1f)	Work in Process-Making Department	$                                      63,140.00
	Work in Process-Packing Department	$                                      69,760.00
	To Factory Overhead-Making Department		$                                       63,140.00
	To Factory Overhead-Packing Department		$                                       69,760.00
	(Being amount of Factory Overhead-Making Department transferred to Work in process -Making Department & Factory Overhead-Packing Department transferred to Work in Process-Packing Department)
1g)	Work in Process-Packing Department	$                                  3,81,740.00
	To Work in Process-Making Department		$                                   3,81,740.00
	(Work in Process-Making Department transferred to Work in process-Making Department)
1h)	Finished Goods	$                                  6,00,790.00
	To Work in Process-Packing Department		$                                   6,00,790.00
	(Work in Process -Packing Department transferred to Finished Goods)
1I)	Cost of goods sold	$                                  6,02,990.00
	To Finished Goods		$                                   6,02,990.00
	(Finished goods transferred to Cost of good sold)
2)		Materials	Work in Process-Making Department	Work in Process-Packing Department	Finished Goods
	Balance on 1st July=(A)	$                                        4,940.00	$                                         8,750.00	$           11,400.00	$        22,510.00
	Debits(As per Journal Entries)=(B)	$                                  2,80,360.00	$                                   3,80,650.00	$       6,05,220.00	$    6,00,790.00
	Credits(As per Jouranl Entries)=(C )	$                                  2,59,470.00	$                                   3,81,740.00	$       6,00,790.00	$    6,02,990.00
	Balance on 31st July=(A)+(B)-(C )	$                                      25,830.00	$                                         7,660.00	$           15,830.00	$        20,310.00
	Debits		($185200+$132310+$63140)	($64420+$89300+$69760+$381740)
3)		Factory Overhead-Making Department	Factory Overhead-Packing Department
	Balance on 1st July	0	0
	Debits	$                                      61,610.00	$                                       70,310.00
	Credits(As per 1f)	$                                    -63,140.00	$                                     -69,760.00
	Balance on 31st July	-1530	550
		1530(CR)	550(DR)
	Debits	($7250+$25620+$24160+$4580)	($2600+$45930+$19950+$1830)