PROBLEM 36 Journal Entries in Process Costing LO 11 The Wilm

PROBLEM 3-6. Journal Entries in Process Costing [LO 11 The Wilmont Box Company pro- duces a single box used by AirSpeed, an express shipping company. Wilmont uses a just-in-time system and has almost no inventories of material, work in process, or finished goods. Indeed, the balances are so small that the company treats them as zero for purposes of its accounting reports During July, the company produced and shipped 125,000 boxes at a cost of $0.90 per box. The cost consisted of 40 percent material cost, 15 percent labor cost, and 45 percent manufacturing overhead. REQUIRED Prepare journal entries to record a. The issuance of direct material. b. The cost of direct labor (credit wages payable). c. The application of manufacturing overhead. d. The completion of units in process and their transfer to finished goods. e. Cost of goods sold.

Solution

Journal Entries Event Account Titles Debit Credit a Work in process $45,000 Raw Material Inventory $45,000 (recording of issuance of direct material) b Work in Process $16,875 Wages Payable $16,875 (recording of cost of direct labour) c Work in process $50,625 Manufacturing Overhead $50,625 (recording of application of manufacturing overheads) d Finished Goods Inventory $112,500 Work in process $112,500 (recording of transfer of work in process to finished goods on its completion) e Cost of goods sold $112,500 Finished Goods Inventory $112,500 (recording of transfer of inventory to cost of goods sold on its sale)