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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

The manufacturing records for Sporty Kayaks at the end of the 2018 fiscal year show the following information about manufacturing overhead:

Overhead allocated to production

\(409,200

Actual manufacturing overhead cost

432,000

Predetermined overhead allocation rate

\)44 per machine hours

Requirements

2. Was manufacturing overhead overallocated or underallocated for the year, and by how much?

Journalize the following labor-related transactions for Portland Glass Creations at its plant in Portland, Oregon. Assume that the labor has been incurred, but not yet paid.

Superior Construction, Inc. is a home builder in Arizona. Superior 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, \(400,000.

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

Direct material

Direct Labor

House 402

\)58,000

\(44,000

House 403

62,000

32,000

House 404

61,000

58,000

House 405

86,000

57,000

c. The company incurred total wages of \)300,000. Use the data from Item b to assign the wages. Wages are not yet paid.

d. Depreciation of construction equipment, \(6,700.

e. Other overhead costs incurred: Equipment rentals paid in cash, \)30,000; Worker liability insurance expired, \(7,000.

f. Allocated overhead to jobs.

g. Houses completed: 402, 404.

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

Requirements

1. Calculate Superior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 costs 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 Superior Construction?

Question: What types of companies use job order costing systems?

Question: Record the following journal entries for Smith Company:

6. Purchased raw materials on account, \(10,000.

7. Used \)6,000 in direct materials and \(500 in indirect materials in production.

8. Incurred \)8,000 in labor costs, of which 80% was direct labor.
See all solutions

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