University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

377

Pages:

2
Author:

stud_ice13

Journal Entries 1. Record Raw Materials Added to Work in Process (WIP) • Raw materials cost: $45 per unit × 500 units = $22,500 Debit Work in Process Inventory $22,500 Credit Accounts Payable $22,500 2. Apply Conversion Costs to WIP • Conversion costs: $75 per unit × 500 units = $37,500 Debit Work in Process Inventory $37,500 Credit Conversion Costs $37,500 3. Record Actual Conversion Costs Incurred • Since actual conversion costs equal applied costs, this entry matches the previous application of conversion costs. Debit Conversion Costs $37,500 Credit Various Payable Accounts $37,500 Note: "Various Payable Accounts" may include Salaries Payable, Utilities Payable, and Accumulated Depreciation. 4. Record Sale of Finished Goods • Sales revenue: $170 per chair × 470 chairs = $79,900 Debit Accounts Receivable $79,900 Credit Sales $79,900 5. Record Cost of Goods Sold (COGS) for Sold Units • • Total cost per chair: $45 (materials) + $75 (conversion) = $120 COGS for sold units: $120 per chair × 470 chairs = $56,400 Debit Cost of Goods Sold $56,400 Credit Work in Process Inventory $56,400 6. Record Remaining Finished Goods Inventory • • Unsold units: 500 produced - 470 sold = 30 units Finished goods inventory for unsold units: $120 per chair × 30 chairs = $3,600 Debit Finished Goods Inventory $3,600 Credit Work in Process Inventory $3,600 Summary These entries capture the flow of raw materials and conversion costs directly into Work in Process, apply conversion costs based on budgeted rates, record sales revenue, calculate cost of goods sold for sold units, and account for any remaining inventory. This approach reflects lean accounting’s streamlined process by reducing separate inventory accounts and focusing on value stream efficiency.