Question

Cost of Production and Journal Entries

Lighthouse Paper Company manufactures newsprint. The product is manufactured in two departments, Papermaking and Converting. Pulp is first placed into a vessel at the beginning of papermaking production. The following information concerns production in the Papermaking Department for March.

Account Work in Process—Papermaking Department							Account No.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Jan.	1	Bal., 7,500 units, 20% completed					22,800
	31	Direct materials, 40,000 units	76,000				98,800
	31	Direct labor	22,550				121,350
	31	Factory overhead	12,682				134,032
	31	Goods transferred, 44,700 units			?		?
	31	Bal., 2,800 units, 30% completed					?

a1. Prepare the March journal entry for the Papermaking Department for the materials charged to production.

a2. Prepare the March journal entry for the Papermaking Department for the conversion costs charged to production. If an amount box does not require an entry, leave it blank.

a3. Prepare the March journal entry for the Papermaking Department for the completed production transferred to the Converting Department. If required, round your interim calculations to two decimal places and your final answer to the nearest dollar.

b. Determine the Work in Process—Papermaking Department March 31 balance. If required, round your interim calculations to two decimal places and your final answer to the nearest dollar.
$

Answer 1

a
Work in Process-Papermaking Department	76000
Materials-Pulp		76000
a2
Work in Process-Papermaking Department	35232
Wages payable		22550
Factory overhead		12682
a3
Work in Process-Converting Department	128040
Work in Process-Papermaking Department		128040
b
Work in Process-Papermaking Department balance	5992

Workings:
Units charged to production:
Inventory in process, January 1			7500
Received from materials storeroom			40000
Total units accounted for by the Papermaking Department			47500
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	7500	0	6000
Started and completed in January	37200	37200	37200
Transferred to Converting Department in January	44700	37200	43200
Inventory in process, January 31	2800	2800	840
Total units to be assigned costs	47500	40000	44040
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Papermaking Department		76000	35232
Total equivalent units		40000	44040
Cost per equivalent unit		1.90	0.80
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1			22800
Costs incurred in January			111232
Total costs accounted for by the Papermaking Department			134032
Cost allocated to completed and partially completed units:
Inventory in process, January 1 balance			22800
To complete inventory in process, January 1	0	4800	4800
Cost of completed January 1 work in process			27600
Started and completed in January	70680	29760	100440
Transferred to Converting Department in January			128040
Inventory in process, January 31	5320	672	5992
Total costs assigned by the Papermaking Department			134032