Question

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments-Refining and Blending. Raw materials are introduced at various points in the Refining Department. The following incomplete Work in Process account is available for the Refining Department for March: March i balance Work in Process-Refining Department 31,600 Completed and transferred to Blending 140,600 72,200 473,000 Materials Direct labor Overhead March 31 balance The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,600; direct labor, $3,500; and overhead, $20,500. Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $16,200; and overhead cost applied to production, $101,000. Required: 1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. Key your entries to the items (a) through (g) below. a. Raw materials used in production. b. Direct labor costs incurred. c. Manufacturing overhead costs incurred for the entire factory, $696,000. (Credit Accounts Payable.) d. Manufacturing overhead was applied to production using a predetermined overhead rate. e. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $622,000. f. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $770,000. g. Completed units were sold on account, $1,500,000. The Cost of Goods Sold was $640,000.

Answer 1

Solution 1-1:

Journal Entries - Lubricants Inc.
Event	Particulars	Debit	Credit
a	Work In Process - Refining department Dr	$140,600.00
	Work In Process - Blending department Dr	$46,000.00
	To Raw material inventory		$186,600.00
	(To record material used in production)
b	Work In Process - Refining department Dr	$72,200.00
	Work In Process - Blending department Dr	$16,200.00
	To Wages Payable		$88,400.00
	(To record direct labor cost incurred)
c	Manufacturing overhead Dr	$696,000.00
	To Accounts Payable		$696,000.00
	(To record manufacturing overhead incurred)
d	Work In Process - Refining department Dr	$473,000.00
	Work In Process - Blending department Dr	$101,000.00
	To Manufacturing overhead		$574,000.00
	(To apply manufacturing overhead)
e	Work In Process - Blending department Dr	$622,000.00
	To Work In Process - Refining department		$622,000.00
	(Being units completed in refining transferred to Blending)
f	Finished goods inventory Dr	$770,000.00
	To Work In Process - Blending department		$770,000.00
	(Being units completed in blending transferred to finished goods)
g1	Accounts receivables Dr	$1,500,000.00
	To Sales Revenue		$1,500,000.00
	(To record sales on account)
g2	Cost of goods sold Dr	$640,000.00
	To Finished goods inventory		$640,000.00
	(To record cost of goods sold)

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