Question

Problem 5-17 Cost Flows [LO 5-1] 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: Work in Process-Refining Department March 1 balance 38.000 Completed and transferred to Blonding Materials 495.000 Direct Labor 72,000 Overhead 181,000 March 31 balance The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $25.000; direct labor $4,000, and overhead, $9,000. Costs incurred during March in the Blending Department were materials used, $115,000; direct lobor, $18,000, and overhead cost applied to production, $42.000 Required: Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March Key your entries to the items () through to below

Answer 1

Solution 1:

Journal Entries - Lubricants Inc.
Event	Particulars	Debit	Credit
a	Work In Process - Refining department Dr	$495,000.00
	Work In Process - Blending department Dr	$115,000.00
	To Raw material inventory		$610,000.00
	(To record material used in production)
b	Work In Process - Refining department Dr	$72,000.00
	Work In Process - Blending department Dr	$18,000.00
	To Wages Payable		$90,000.00
	(To record direct labor cost incurred)
c	Manufacturing overhead Dr	$225,000.00
	To Accounts Payable		$225,000.00
	(To record manufacturing overhead incurred)
d	Work In Process - Refining department Dr	$181,000.00
	Work In Process - Blending department Dr	$42,000.00
	To Manufacturing overhead		$223,000.00
	(To apply manufacturing overhead)
e	Work In Process - Blending department Dr	$740,000.00
	To Work In Process - Refining department		$740,000.00
	(Being units completed in refining transferred to Blending)
f	Finished goods inventory Dr	$950,000.00
	To Work In Process - Blending department		$950,000.00
	(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	$900,000.00
	To Finished goods inventory		$900,000.00
	(To record cost of goods sold)

Solution 2:

Raw materials inventory
Particulars	Debit	Particulars	Credit
March 1 balance	$618,000.00	Material used	$610,000.00
March 31, balance	$8,000.00
Work In Process - Refining
Particulars	Debit	Particulars	Credit
March 1 balance	$38,000.00	Completed and transferred to Blending	$740,000.00
Material	$495,000.00
Direct labor	$72,000.00
Overhead	$181,000.00
March 31, balance	$46,000.00
Work In Process - Blending
Particulars	Debit	Particulars	Credit
March 1 balance	$65,000.00	Completed and transferred to Finished Goods	$950,000.00
Transferred from Refining	$740,000.00
Material	$115,000.00
Direct labor	$18,000.00
Overhead	$42,000.00
March 31, balance	$30,000.00
Finished Goods Inventory
Particulars	Debit	Particulars	Credit
March 1 balance	$20,000.00	Cost of goods sold	$900,000.00
Transferred from Blending	$950,000.00
March 31, balance	$70,000.00
Manufacturing overhead
Particulars	Debit	Particulars	Credit
Overhead incurred	$225,000.00	Overhead applied	$223,000.00
March 31, balance	$2,000.00
Cost of goods sold
Particulars	Debit	Particulars	Credit
Finished goods inventory	$900,000.00
March 31, balance	$900,000.00
Sales Revenue
Particulars	Debit	Particulars	Credit
		Accounts receivables	$1,500,000.00
		March 31, balance	$1,500,000.00