The Mixing Department performs a series of processes in which a fluid chemical is concentrated. Records indicate that the Mixing Department has been charged with $192,000 of direct labor costs. The manufacturing overhead rate is 150% of direct labor costs. Beginning work in process was $672,000 and ending work in process totaled $102,000. One-half of this period's completed products is sold on account at a price equal to 160% of its cost. Prepare journal entries to record (1) various costs charged to the Mixing Department this! period, (2) transfer of this period's completed product, and (3) sale of one-half of this period's production. General Journal Description Ref. Debit Credit To record direct labor costs. To record manufacturing overhead. To record completed production (3) To record cost of goods sold. To record this period's sales.
1) Various costs charged to the Mixing Department this period:
Direct Labor Costs
Work In Process Inventory
Manufacturing Overhead
Work In Process Inventory
Raw Materials Inventory
2) Transfer of this period's completed product:
Finished Goods Inventory
Work In Process Inventory
3) Sale of one-half of this period's production:
Accounts Receivable
Sales Revenue
Cost of Goods Sold
Finished Goods Inventory
1) Journal entries to record various costs charged to the Mixing Department this period:
Date Account Description Debit Credit
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Direct Labor Costs To record direct labor costs $192,000
Manufacturing Overhead To record manufacturing overhead $288,000
Explanation:
- Direct labor costs of $192,000 are recorded as a debit to the "Direct Labor Costs" account.
- Manufacturing overhead, which is 150% of direct labor costs ($192,000 x 150% = $288,000), is recorded as a credit to the "Manufacturing Overhead" account.
2) Journal entry to record transfer of this period's completed product:
Date Account Description Debit Credit
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Work in Process To record transfer of completed product $672,000
Finished Goods To record transfer of completed product $672,000
Explanation:
- The beginning work in process of $672,000 is transferred to the "Finished Goods" account, representing completed products.
- An equal amount of $672,000 is debited to the "Work in Process" account to balance the journal entry.
3) Journal entries to record the sale of one-half of this period's production:
Date Account Description Debit Credit
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Accounts Receivable To record sales $537,600
Sales To record sales $537,600
Cost of Goods Sold To record cost of goods sold $336,000
Finished Goods To reduce inventory $336,000
Explanation:
- Sales revenue of $537,600 (160% of the cost of goods sold) is recorded as a debit to the "Accounts Receivable" account and a credit to the "Sales" account.
- The cost of goods sold amounting to $336,000 is recorded as a debit to the "Cost of Goods Sold" account.
- The finished goods inventory is reduced by $336,000, recorded as a credit to the "Finished Goods" account to balance the journal entry.