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Chapter 17: Q17-6RQ (page 938)

Question: A job was started on May 15, completed on June 27, and delivered to the customer on July 6. In which accounts would the costs be recorded on the financial statements dated May 31, June 30, and July 31?

Short Answer

Expert verified

Answer:

The cost would be recorded on the financial statement on May 31 as the work in process inventory on the balance sheet. On June 30, cost is recorded as the finished goods inventory in the balance sheet and On 31 July, the cost is recorded as the cost of goods sold on the income statement.

Step by step solution

01

Work-in-process

Work in process shows the partially completed goods of the company. It is also termed as the foods in process waiting for completion and eventual sale of the goods.

02

Finished goods

Finished goods means the goods which have been completed by the manufacturing process but not yet sold to the customers.

The inventory is classified as work in process, finished goods while recording in the balance sheet. When the manufacturing of goods is started but not completed, it is classified as work in process. When the manufacturing is completed, it is transferred to the finished goods in the balance sheet. And, when the finished goods are sold to the customers then it is treated as the cost of goods sold in the income statement.

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Most popular questions from this chapter

What is an allocation base? Give some examples

Back Country manufactures backpacks. Its plant records include the following materials-related data

Journalize the entries to record the transactions, post to the Raw Materials Inventory account, and determine the ending balance in Raw Materials Inventory.

Meadow Construction, Inc. is a home builder in Arizona. Meadow uses a job order costing system in which each house is a job. Because it constructs houses, the company uses an account titled Construction Overhead. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction overhead of \(1,150,000 and total direct labor costs of \)5,750,000. The following events occurred during August:

a. Purchased materials on account, \(450,000.

b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned.

Direct material

Direct Labor

House 402

\)52,000

\(47,000

House 403

67,000

36,000

House 404

63,000

54,000

House 405

88,000

52,000

c. The company incurred total wages of \)240,000. Use the data from Item b to

assign the wages. Wages are not yet paid.

d. Depreciation of construction equipment, \(6,300.

e. Other overhead costs incurred: Equipment rentals paid in cash, \)40,000; Worker liability insurance expired, \(5,000.

f. Allocated overhead to jobs.

g. Houses completed: 402, 404.

h. House sold on account: 404 for \)250,000.

Requirements

1. Calculate Meadow鈥檚 predetermined overhead allocation rate for the year.

2. Prepare journal entries to record the events in the general journal.

3. Open T-accounts for Work-in-Process Inventory and Finished Goods Inventory.

Post the appropriate entries to these accounts, identifying each entry by letter.

Determine the ending account balances, assuming that the beginning balances

were zero.

4. Add the costs of the unfinished houses, and show that this total amount equals the ending balance in the Work-in-Process Inventory account.

5. Add the cost of the completed house that has not yet been sold, and show that this equals the ending balance in Finished Goods Inventory.

6. Compute gross profit on the house that was sold. What costs must gross profit

cover for Meadow Construction?

Explain the terms accumulate, assign, allocate, and adjust as they apply to job order costing.

Question: Would the following companies most likely use a job order costing system or a process costing system?

1. Paint manufacturer

2. Print shop

3. Caterer

4. Soft drink bottler

5. Yacht builder
See all solutions

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