Question

38.

Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 500 kgs of tungsten carbide at $60 per kg. It started manufacture of 4,000 vases and completed and transferred 3,200 vases during the month. It has 800 vases in the process at the end of the month. It incurred direct labor charges of $2,000 and other manufacturing costs of $600, which included electricity costs of $700. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 55% complete in respect of conversion costs. Which of the following journal entry would record the tungsten carbide purchased and used in production during July? $2,400 O A. Accounts Payable Control Work in Process—Molding $2,400 $30,000 B. Accounts Payable Control Work in Process—Molding $30,000 $30,000 O C. Work in Process—Molding Accounts Payable Control $30,000 $2,400 D. Work in Process—Molding Accounts Payable Control $2,400

Answer 1

Total Cost of Material Purchased:
Units purchased			500
Multiply: Cost per unit		60
Total Cost of Material Purchased:	30000
Journal entry for purchase and usedin Production:
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Work in process inventory-Molding	30,000
	Accounts payable				30,000
	(for material purchased for production)
Answer is C.
Work in Process-Molding	30,000
Accounts payable control		30,000