Question

Closing the Balances in The Variance Accounts at the End of the Year Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end: Debit Credit Direct Materials Price Variance $13,550 Direct Materials Usage Variance $1,100 Direct Labor Rate Variance 820 Direct Labor Efficiency Variance $12,340 Unadjusted Cost of Goods Sold equals $1,550,000, unadjusted Work in Process equals $246,000, and unadjusted Finished Goods equals $180,000. Required: 1. Assume that the ending balances in the variance accounts are immaterial and prepare the journal entries to close them to Cost of Goods Sold. Note: Close the variances with a debit balance first. If an amount box does not require an entry, leave it blank or enter "0".

Answer 1

1.

Account Titles and Explanation	Debit	Credit
Cost of goods sold	25890
Direct Materials Price Variance		13550
Direct Labor Efficiency Variance		12340
Direct Materials Usage Variance	1100
Direct Labor Rate Variance	820
Cost of Goods Sold		1920

Adjusted Cost of Goods Sold = = $1550000–1920+25890 = $1573970