{"id":934,"date":"2021-04-01T18:26:18","date_gmt":"2021-04-01T18:26:18","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=934"},"modified":"2021-08-04T01:31:16","modified_gmt":"2021-08-04T01:31:16","slug":"journal-entries","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/chapter\/journal-entries\/","title":{"raw":"Journal Entries","rendered":"Journal Entries"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Prepare journal entries for a process costing system<\/li>\r\n<\/ul>\r\n<\/div>\r\n<img class=\"aligncenter wp-image-1710 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/14230431\/Screen-Shot-2021-05-14-at-3.59.59-PM.png\" alt=\"A graphic showing the progression from left to right from the Mixing Department to the Baking Department to the Packaging Department to Finished Goods. Under each department is shown the formula Direct Materials + Direct Labor + Factory Overhead (for that department) = Work in Process (for that department). Under Finished Goods, it states Total cost of the batch includes work in process costs from all three departments.\" width=\"953\" height=\"275\" \/>\r\n\r\nCosts are recorded in the accounting records in various ways according to company policies, but in essence, each cost related to a product is accumulated in work-in-process until the goods are finished. When the product is sold, the cost of the product is moved from Finished Goods Inventory to Cost of Goods Sold.\r\n\r\n[caption id=\"\" align=\"alignnone\" width=\"1400\"]<img src=\"https:\/\/lh3.googleusercontent.com\/-ZEcNLp5Ng7JI3MPhQA7oYd2JuB_QRkSUKxWJ9ZqnqU9ODW_ir03ROTIqn9jAlKZhv3i7k_c4wpnno6Cax405goaoI7KaNoiNTavCzeQdGKpeNyEyODbwEnD1DXEaTKQND6lRrlI\" alt=\"See caption for link to long description.\" width=\"1400\" height=\"1073\" \/> See the <a href=\"https:\/\/docs.google.com\/document\/d\/1MSfErY5CTnb4b8JTlmqOY2pQFKezb4eX9SkRr6q8b7M\/edit?usp=sharing\" target=\"_blank\" rel=\"noopener\">illustration long description<\/a> here.[\/caption]\r\n\r\nLet\u2019s trace some representative transactions through Dad\u2019s Perfect Pies accounting system.\r\n\r\nFirst, for the sake of simplicity, let\u2019s assume that as of the start of business on January 1, there were only two general ledger accounts with balances: the checking account and the owner\u2019s capital account. All journal entries and ledger accounts are expressed in dollars, but the dollar signs in this example have been omitted, which is customary in accounting records.\r\n\r\n<img class=\"aligncenter wp-image-1667 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162038\/6.3.1-a.png\" alt=\"A t-account for Checking Account shows a debit of $100,000 beginning and ending balance. A t-account for Owner's Capital shows a credit of $100,000 beginning and ending balance.\" width=\"924\" height=\"186\" \/>\r\nOn January 2nd, the company paid rent on the facility and machines. For purposes of this example, we\u2019ll limit the transactions to factory overhead. Normally, all kinds of expenses would be posted to this account, and there would also be general, selling, and administrative expenses that would be posted to other expense accounts not related to the manufacturing process.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 02<\/td>\r\n<td class=\"highlight\">Factory Overhead<\/td>\r\n<td class=\"r highlight\">3,500<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Checking Account<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">3,500<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Rent on manufacturing facility<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nThis would then be posted on the appropriate ledger pages:\r\n\r\n<img class=\"aligncenter wp-image-1669 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162404\/6.3.1-b.png\" alt=\"A journal entry dated January 2 shows a debit of $3,500 to Factory Overhead and a credit of $3,500 to Checking Account with the note &quot;Rent on manufacturing facility&quot;. The debit portion of the journal entry points to a t-account for Factory Overhead that shows the debit of $3,500 dated Jan 2. The credit portion of the journal entry points to a t-account for Checking Account that shows a beginning balance of $100,000, a credit of $3,500 dated Jan 2, and an ending debit balance of $96,500. The Owner's Capital t-account is also shown with a credit balance of $100,000.\" width=\"624\" height=\"105\" \/>\r\n\r\nThat same day the company bought two tons of flour @ $0.60\/lb, one ton of butter at $1.20\/lb, and 3200 pie tins @.25 each. The supplier extended the company credit terms of 30 days.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 02<\/td>\r\n<td class=\"highlight\">Raw Materials - direct<\/td>\r\n<td class=\"r highlight\">5,600<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0Accounts Payable<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">5,600<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Purchased materials on account<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1670 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162442\/6.3.1-c.png\" alt=\"A journal entry dated January 2 shows a debit of $5,600 to Raw Materials - direct and a credit of $5,600 to Accounts Payable with the note \u201cPurchased materials on account\u201d. The debit portion of the journal entry points to a t-account for Raw Materials - direct that shows the debit of $5,600 dated Jan 2. The credit portion of the journal entry points to a t-account for Accounts Payable that shows the credit of $5,600 dated Jan 2. The Checking Account, Factory Overhead, and Owner's Capital t-accounts are also shown with their respective balances of $96,500 debit, $3,500 debit, and $100,000 credit.\" width=\"624\" height=\"157\" \/>\r\n\r\nThen the company bought sugar, salt, and other indirect raw materials:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 02<\/td>\r\n<td class=\"highlight\">Raw Materials - indirect<\/td>\r\n<td class=\"r highlight\">600<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Accounts Payable<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">600<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Purchased materials on account.<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1671 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162511\/6.3.1-d.png\" alt=\"A journal entry dated January 2 shows a debit of $600 to Raw Materials - indirect and a credit of $600 to Accounts Payable with the note \u201cPurchased materials on account\u201d. The debit portion of the journal entry points to a t-account for Raw Materials - indirect that shows the debit of $600 dated Jan 2. The credit portion of the journal entry points to a t-account for Accounts Payable that shows the credit of $600 dated Jan 2, which in addition to the $5,600 credit leads to an ending credit balance of $6,200. The Checking Account, Raw Materials - direct, Factory Overhead, and Owner's Capital t-accounts are also shown with their respective balances of $96,500 debit, $5,600 debit $3,500 debit, and $100,000 credit.\" width=\"624\" height=\"220\" \/>\r\n\r\nAnd on January 3rd, the Mixing Department production manager submitted a raw materials requisition order to the inventory manager for 500 pounds of flour and 375 pounds of butter\u2014enough raw materials to mix up a batch of 750 pie crusts. This results in a journal entry that moves the cost of the materials from raw materials to work in process. Five hundred pounds of flour that cost $0.60 per pound = $300, and 375 pounds of butter at $1.20 per pound = $450, which is $750 total, which comes to $1 in raw materials per pie shell (each shell takes \u2154 pound of flour and half a pound of butter). These would then be the equivalent of standard costs and standard quantities.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 03<\/td>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Started batch 1 - moved raw materials into production<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1672 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162536\/6.3.1-e.png\" alt=\"A journal entry dated January 3 shows a debit of $750 to Work in Process and a credit of $750 to Raw Materials - direct with the note \u201cStarted batch 1 - moved raw materials into production\u201d. The debit portion of the journal entry points to a t-account for Work in Process - Mixing that shows the debit of $750 dated Jan 3. The credit portion of the journal entry points to a t-account for Raw Materials - direct that shows the credit of $750 dated Jan 3, which in addition to the $5,600 debit leads to an ending debit balance of $4,850. The Checking Account, Raw Materials - indirect, Accounts Payable, Factory Overhead, and Owner's Capital t-accounts are also shown with their respective balances of $96,500 debit, $600 debit, $6,200 credit, $5,600 debit, $3,500 debit, and $100,000 credit.\" width=\"624\" height=\"224\" \/>\r\n\r\n<\/div>\r\nBy crediting the asset account Raw Materials - direct and debiting the asset account Work in Process - Mixing, the cost of the raw materials are \u201creassigned\u201d from the inventory pool to the process.\r\n\r\n<img class=\"aligncenter wp-image-1673 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162557\/6.3.1-f.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Raw Materials - direct that shows the credit of $750 dated Jan 3, and points to a debit of $750 dated Jan 3 on the Work in Process - Mixing t-account. \" width=\"624\" height=\"427\" \/>\r\n\r\nYou can review the rules of debit and credit by watching this video:\r\n\r\n[embed]https:\/\/youtu.be\/ICDJrsg4abg[\/embed]\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3-us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/DebitsAndCreditsMadeEasyWithADExLER_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"Debits and Credits MADE EASY with ADEx LER\" here (opens in new window)<\/a>.\r\n\r\nThe company started another batch on January 15th:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 15<\/td>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Started batch 2 - moved raw materials into production<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nA third batch on the 21st:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 21<\/td>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Started batch 3 - moved raw materials into production<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAnd a fourth batch on the 28th:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 28<\/td>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">750<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Started batch 4 - moved raw materials into production<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nResulting in the following ledger balances:\r\n\r\n[caption id=\"attachment_1674\" align=\"aligncenter\" width=\"624\"]<img class=\"wp-image-1674 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162625\/6.3.1-g.png\" alt=\"See caption for link to long description.\" width=\"624\" height=\"511\" \/> See the <a href=\"https:\/\/docs.google.com\/document\/d\/1QVkWfxzEKMn0C1H_TwbzVeIkeVTv9qXqseDKcNdquZ8\/edit?usp=sharing\" target=\"_blank\" rel=\"noopener\">image long description<\/a> here.[\/caption]\r\n\r\nAt the end of the month, a physical count of the indirect raw materials (sugar, salt, etc.) revealed that there was $200 (at original cost) of supplies left in those bins, so the accountants made the following entry to factory overhead:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Factory Overhead<\/td>\r\n<td class=\"r highlight\">400<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials - indirect<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">400<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>adjust raw materials inventory<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nWhich, when posted, moved the cost of indirect raw materials to factory overhead:\r\n\r\n<img class=\"aligncenter wp-image-1675 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162648\/6.3.1-h.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Raw Materials - indirect that shows the credit of $400 dated Jan 31, and points to a debit of $400 dated Jan 31 on the Factory Overhead t-account. \" width=\"624\" height=\"523\" \/>\r\n\r\nMeanwhile, the baking\/packaging department used 2,400 pie tins that cost $0.25 each. They add them at the end of the process as they are packaging because the pie shells are cooked upside-down on a baking mold. The tins are part of final preparation for freezing and shipping. Although the tins were used as each batch was completed, we\u2019ll just make one journal entry at the end of the period.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Work-in-process - Baking\/Packaging<\/td>\r\n<td class=\"r highlight\">600<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">600<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Record raw materials used in packaging<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1676 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162716\/6.3.1-i.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Raw Materials - direct that shows the credit of $600 dated Jan 31, and points to a debit of $600 dated Jan 31 on the Work in Process - Baking\/Packaging t-account. \" width=\"624\" height=\"523\" \/>\r\n\r\nAlso on the 31st, the payroll department calculated the wages owed to workers. Based on the time cards, wages were split as follows:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Work-in-process - Mixing<\/td>\r\n<td class=\"r highlight\">1,440<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">Work-in-process - Baking\/Packaging<\/td>\r\n<td class=\"r highlight\">1,100<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">Factory Overhead<\/td>\r\n<td class=\"r highlight\">900<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Wages Payable<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">3,440<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>To accrue factory wages<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1677 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162738\/6.3.1-j.png\" alt=\"A journal entry dated January 31 shows a debit of $1,440 to Work in Process - Mixing, a debit of $1,100 to Work in Process - Baking\/Packaging, a debit of $900 to Factory Overhead, and a credit of $3,440 to Wages Payable with the note \u201cTo accrue factory wages\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"624\" height=\"337\" \/>\r\n\r\nThe company allocated Manufacturing Overhead to the Mixing Department based on Direct Machine Hours at a rate of $0.50 per hour. Machine hours for January were 3,600, resulting in an allocation of $1,800 of factory overhead to the mixing department.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Work-in-process - Mixing<\/td>\r\n<td class=\"r highlight\">1,800<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Factory Overhead<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">1,800<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Allocate factory overhead<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1678 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162808\/6.3.1-k.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Factory Overhead that shows the credit of $1,800 dated Jan 31, and points to a debit of $1,800 dated Jan 31 on the Work in Process - Mixing t-account. \" width=\"325\" height=\"402\" \/>\r\n\r\nWe can now create the production cost report for the mixing department to determine the cost of product transferred out to baking\/packaging:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>Dad's Perfect Pies\r\nProduction Cost Report - Mixing Department\r\nMonth Ended January 31<\/caption>\r\n<tbody>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"c\" colspan=\"2\">Equivalent Units<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"font-weight: bold;\" colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>UNITS<\/strong><\/td>\r\n<td class=\"r\">Physical Units<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\r\n<td class=\"r\">0<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Started in production<\/td>\r\n<td class=\"r\">3,000<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units to account for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">450<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units accounted for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"font-weight: bold;\" colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>COSTS<\/strong><\/td>\r\n<td class=\"r\">Direct Materials<\/td>\r\n<td class=\"r\">Conversion Costs<\/td>\r\n<td class=\"r\">Total Costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0-<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0\u00a0 \u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 -<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Costs added during the period<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a03,000<\/td>\r\n<td class=\"r\">$ \u00a0 3,240<\/td>\r\n<td class=\"r\">$ 6,240<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs to account for<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a03,000<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a03,240<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Divided by: Total EUP<\/td>\r\n<td><\/td>\r\n<td class=\"r\">\u00a0 3,000<\/td>\r\n<td class=\"r\">\u00a0 2,700<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost per equivalent unit<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0\u00a0\u00a01.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0\u00a01.20<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs accounted for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\r\n<td><\/td>\r\n<td class=\"r highlight\">$\u00a0 2,250<\/td>\r\n<td class=\"r highlight\">$\u00a0 \u00a02,700<\/td>\r\n<td class=\"r highlight\">$\u00a04,950<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0750<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 540<\/td>\r\n<td class=\"r\">$\u00a01,290<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs accounted for<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 3,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a03,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAnd then journalize and post the transfer:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Work-in-process - Baking\/Packaging<\/td>\r\n<td class=\"r highlight\">4,950<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Work-in-process - Mixing Dept<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">4,950<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Record transfer of pie shells<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<img class=\"aligncenter wp-image-1679 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162834\/6.3.1-l.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Work in Process - Mixing that shows the credit of $4,950 dated Jan 31, and points to a debit of $4,950 dated Jan 31 on the Work in Process - Baking\/Packaging t-account. \" width=\"328\" height=\"429\" \/>\r\n\r\nNext, we allocate factory overhead to the baking\/packaging department. In this example, we\u2019ll use a rate of $30\/machine-hour against 100 machine hours for a total allocation of $3,000. Using standard costs like this usually leaves some under or over-allocated factory overhead that we would eventually have to account for, but in this example, we will be allocating all of the factory overhead with no leftover.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Work-in-process - Baking\/Packaging<\/td>\r\n<td class=\"r highlight\">3,000<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Factory Overhead<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">3,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Allocate factory overhead to baking<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1680 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162854\/6.3.1-m.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Factory Overhead that shows the credit of $3,000 dated Jan 31, and points to a debit of $3,000 dated Jan 31 on the Work in Process - Baking\/Packaging t-account. \" width=\"326\" height=\"472\" \/>\r\n\r\nAnd now we can complete the production cost report for the baking\/packaging department:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>Dad's Perfect Pies\r\nProduction Cost Report - Baking\/Packaging Department\r\nMonth Ended January 31<\/caption>\r\n<tbody>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">Equivalent Units<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>UNITS<\/strong><\/td>\r\n<td class=\"r\">Physical Units<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Transferred In<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Beginning work-in-process<\/td>\r\n<td class=\"r\">0<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Transferred in from mixing<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units to account for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"6\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Completed and transferred out<\/td>\r\n<td class=\"r\">2,000<\/td>\r\n<td class=\"r\">2,000<\/td>\r\n<td class=\"r\">2,000<\/td>\r\n<td class=\"r\">2,000<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Ending work-in-process<\/td>\r\n<td class=\"r\">250<\/td>\r\n<td class=\"r\">250<\/td>\r\n<td class=\"r\">0<\/td>\r\n<td class=\"r\">50<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units accounted for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,050<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>COSTS<\/strong><\/td>\r\n<td><\/td>\r\n<td class=\"r\">Transferred In<\/td>\r\n<td class=\"r\">Direct Materials<\/td>\r\n<td class=\"r\">Conversion Costs<\/td>\r\n<td class=\"r\">Total Costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Beginning work-in-process<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0\u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0\u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 -<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Costs added during the period<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 4,950<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 600<\/td>\r\n<td class=\"r\">$\u00a0 4,100<\/td>\r\n<td class=\"r\">$ 9,650<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs to account for<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 4,950<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 600<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a04,100<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 9,650<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Divided by: Total EUP<\/td>\r\n<td><\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 2,250<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a02,000<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 2,050<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost per equivalent unit<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a02.20<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a00.30<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a02.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"6\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs accounted for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"highlight\">Completed and transferred out<\/td>\r\n<td><\/td>\r\n<td class=\"r highlight\">$\u00a0 \u00a04,400<\/td>\r\n<td class=\"r highlight\">$ \u00a0\u00a0 600<\/td>\r\n<td class=\"r highlight\">$\u00a0 4,000<\/td>\r\n<td class=\"r highlight\">$ 9,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Ending work-in-process<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0550<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0\u00a0 100<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0650<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs accounted for<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 4,950<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0600<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a04,100<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 9,650<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nNotice that the total costs to be accounted for are taken from the general ledger account and that we are transferring out 2,000 completed units at a total cost of $9,000, which is $4.50 per unit.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Finished Goods Inventory<\/td>\r\n<td class=\"r highlight\">9,000<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 \u00a0 Work-in-process - Baking\/Packaging<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">9,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Record cost of completed units transferred to storage<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1681 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162921\/6.3.1-n.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Work in Process - Baking\/Packaging that shows the credit of $9,000 dated Jan 31, and points to a debit of $9,000 dated Jan 31 on the Finished Goods Inventory t-account. \" width=\"326\" height=\"589\" \/>\r\n\r\nTo finish off the cycle, let\u2019s say we sold 1,600 pie shells at $6 per shell, to a wholesaler\/distributor on the last day of the month.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"c\">Jan 31<\/td>\r\n<td class=\"highlight\">Accounts Receivable<\/td>\r\n<td class=\"r highlight\">9,600<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 Sales Revenue<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">9,600<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">Cost of Goods Sold<\/td>\r\n<td class=\"r highlight\">7,200<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0 Finished Goods Inventory<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">7,200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Record sale of 1600 pie crusts to wholesaler @ $6<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\nObviously, there would be many more transactions in a real business, even a small one like this, and there would be selling, general, and administrative costs as well. But we\u2019ll end this example here, with the posting of the sale that records the revenue earned but not yet collected and the cost of the 1,600 shells sold being transferred from Finished Goods to Cost of Goods Sold.\r\n\r\n<img class=\"aligncenter wp-image-1682 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14163020\/6.3.1-o.png\" alt=\"A journal entry dated January 31 shows a debit of $9,600 to Accounts Receivable, a credit of $9,600 to Sales Revenue, a debit of $7,200 to Cost of Goods Sold, and a credit of $7,200 to Finished Goods Inventory with the note \u201cRecord sale of 1600 pie crust to wholesaler @ $6\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"624\" height=\"453\" \/>\r\n\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-1698 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14200308\/Screen-Shot-2021-05-14-at-12.56.09-PM-1024x382.png\" alt=\"A graphic titled Process Costing System is shown. On the left is a yellow area containing direct materials, direct labor and manufacturing overhead. To the right are three orange areas labeled Work In Process Inventory, which are further identified as Mixing, Molding, and Packaging. Arrows point from the yellow area to all three orange areas. Arrows also point from Mixing to Molding to Packaging. To the right of Packaging is an arrow pointing to a green area labeled as Finished Goods Inventory. To the right of that is an arrow pointing to a purple area labeled as Cost of Goods Sold. The Work in Process and Finished Goods Inventory areas are labeled as being on the Balance Sheet, and the Cost of Goods Sold area is labeled as being on the Income Statement.\" width=\"1024\" height=\"382\" \/>\r\n\r\nHere are the final account tallies from the general ledger showing that debits equal credits:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<tbody>\r\n<tr>\r\n<td>Dad's Perfect Pies<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Trial Balance<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Jan 31<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td>DR<\/td>\r\n<td>CR<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Checking Account<\/td>\r\n<td class=\"r\">96,500<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Accounts Receivable<\/td>\r\n<td class=\"r\">9,600<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Raw Materials - direct<\/td>\r\n<td class=\"r\">2,000<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Raw Materials - indirect<\/td>\r\n<td class=\"r\">200<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Work in Process - Mixing<\/td>\r\n<td class=\"r\">1,290<\/td>\r\n<td><\/td>\r\n<td>see production cost report<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Work in Process - Baking\/Packaging<\/td>\r\n<td class=\"r\">650<\/td>\r\n<td><\/td>\r\n<td>see production cost report<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Finished Goods<\/td>\r\n<td class=\"r\">1,800<\/td>\r\n<td><\/td>\r\n<td>400 finished pie shells at $4.50 ea<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Accounts Payable<\/td>\r\n<td><\/td>\r\n<td class=\"r\">6,200<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Wages Payable<\/td>\r\n<td><\/td>\r\n<td class=\"r\">3,440<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Owner's Capital<\/td>\r\n<td><\/td>\r\n<td class=\"r\">100,000<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Sales Revenue<\/td>\r\n<td><\/td>\r\n<td class=\"r\">9,600<\/td>\r\n<td>1600 shells @$6.00 each<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost of Goods Sold<\/td>\r\n<td class=\"r\">7,200<\/td>\r\n<td><\/td>\r\n<td>1600 shells @ $4.50 each<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Factory Overhead<\/td>\r\n<td class=\"r\">-<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>119,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>119,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAnd a reconciliation of the direct raw materials purchased, used, and remaining:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<tbody>\r\n<tr>\r\n<td>Direct Materials Inventory Count - Jan 31<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td>Flour<\/td>\r\n<td>Butter<\/td>\r\n<td>Tins<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Purchased, in pounds<\/td>\r\n<td class=\"r\">4,000<\/td>\r\n<td class=\"r\">2,000<\/td>\r\n<td class=\"r\">3,200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>used for batch 1<\/td>\r\n<td class=\"r\">(500)<\/td>\r\n<td class=\"r\">(375)<\/td>\r\n<td class=\"r\">(800)<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>used for batch 2<\/td>\r\n<td class=\"r\">(500)<\/td>\r\n<td class=\"r\">(375)<\/td>\r\n<td class=\"r\">(800)<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>used for batch 3<\/td>\r\n<td class=\"r\">(500)<\/td>\r\n<td class=\"r\">(375)<\/td>\r\n<td class=\"r\">(800)<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>used for batch 4<\/td>\r\n<td class=\"r\">(500)<\/td>\r\n<td class=\"r\">(375)<\/td>\r\n<td class=\"r\">0<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Left<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>2,000<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>500<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>800<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost<\/td>\r\n<td class=\"r\">$0.60<\/td>\r\n<td class=\"r\">$1.20<\/td>\r\n<td class=\"r\">$0.25<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Remaining ($2,000 total)<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$1,200.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$600.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$200.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nNotice that the $1,290 of ending work-in-process for the mixing department ties to the production cost report, as does the ending work in process of $650 for the baking\/packaging department.\r\n\r\nBy reconciling and proving each account, financial and managerial accountants verify that the information fairly represents the actual costs and results of operations.\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=6352572&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=aN-9PhQvmjE&amp;video_target=tpm-plugin-fm3k653k-aN-9PhQvmjE\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/ProcessCostingJournalEntries_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"Process Costing Journal Entries\" here (opens in new window)<\/a>.\r\n\r\nBefore we take a final look at the production cost report from an analysis standpoint, check your understanding of the recording process that gives us the accurate information we need to track costs.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]219053[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Prepare journal entries for a process costing system<\/li>\n<\/ul>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1710 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/14230431\/Screen-Shot-2021-05-14-at-3.59.59-PM.png\" alt=\"A graphic showing the progression from left to right from the Mixing Department to the Baking Department to the Packaging Department to Finished Goods. Under each department is shown the formula Direct Materials + Direct Labor + Factory Overhead (for that department) = Work in Process (for that department). Under Finished Goods, it states Total cost of the batch includes work in process costs from all three departments.\" width=\"953\" height=\"275\" \/><\/p>\n<p>Costs are recorded in the accounting records in various ways according to company policies, but in essence, each cost related to a product is accumulated in work-in-process until the goods are finished. When the product is sold, the cost of the product is moved from Finished Goods Inventory to Cost of Goods Sold.<\/p>\n<div style=\"width: 1410px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/-ZEcNLp5Ng7JI3MPhQA7oYd2JuB_QRkSUKxWJ9ZqnqU9ODW_ir03ROTIqn9jAlKZhv3i7k_c4wpnno6Cax405goaoI7KaNoiNTavCzeQdGKpeNyEyODbwEnD1DXEaTKQND6lRrlI\" alt=\"See caption for link to long description.\" width=\"1400\" height=\"1073\" \/><\/p>\n<p class=\"wp-caption-text\">See the <a href=\"https:\/\/docs.google.com\/document\/d\/1MSfErY5CTnb4b8JTlmqOY2pQFKezb4eX9SkRr6q8b7M\/edit?usp=sharing\" target=\"_blank\" rel=\"noopener\">illustration long description<\/a> here.<\/p>\n<\/div>\n<p>Let\u2019s trace some representative transactions through Dad\u2019s Perfect Pies accounting system.<\/p>\n<p>First, for the sake of simplicity, let\u2019s assume that as of the start of business on January 1, there were only two general ledger accounts with balances: the checking account and the owner\u2019s capital account. All journal entries and ledger accounts are expressed in dollars, but the dollar signs in this example have been omitted, which is customary in accounting records.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1667 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162038\/6.3.1-a.png\" alt=\"A t-account for Checking Account shows a debit of $100,000 beginning and ending balance. A t-account for Owner's Capital shows a credit of $100,000 beginning and ending balance.\" width=\"924\" height=\"186\" \/><br \/>\nOn January 2nd, the company paid rent on the facility and machines. For purposes of this example, we\u2019ll limit the transactions to factory overhead. Normally, all kinds of expenses would be posted to this account, and there would also be general, selling, and administrative expenses that would be posted to other expense accounts not related to the manufacturing process.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 02<\/td>\n<td class=\"highlight\">Factory Overhead<\/td>\n<td class=\"r highlight\">3,500<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Checking Account<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">3,500<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Rent on manufacturing facility<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>This would then be posted on the appropriate ledger pages:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1669 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162404\/6.3.1-b.png\" alt=\"A journal entry dated January 2 shows a debit of $3,500 to Factory Overhead and a credit of $3,500 to Checking Account with the note &quot;Rent on manufacturing facility&quot;. The debit portion of the journal entry points to a t-account for Factory Overhead that shows the debit of $3,500 dated Jan 2. The credit portion of the journal entry points to a t-account for Checking Account that shows a beginning balance of $100,000, a credit of $3,500 dated Jan 2, and an ending debit balance of $96,500. The Owner's Capital t-account is also shown with a credit balance of $100,000.\" width=\"624\" height=\"105\" \/><\/p>\n<p>That same day the company bought two tons of flour @ $0.60\/lb, one ton of butter at $1.20\/lb, and 3200 pie tins @.25 each. The supplier extended the company credit terms of 30 days.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 02<\/td>\n<td class=\"highlight\">Raw Materials &#8211; direct<\/td>\n<td class=\"r highlight\">5,600<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0Accounts Payable<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">5,600<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Purchased materials on account<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1670 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162442\/6.3.1-c.png\" alt=\"A journal entry dated January 2 shows a debit of $5,600 to Raw Materials - direct and a credit of $5,600 to Accounts Payable with the note \u201cPurchased materials on account\u201d. The debit portion of the journal entry points to a t-account for Raw Materials - direct that shows the debit of $5,600 dated Jan 2. The credit portion of the journal entry points to a t-account for Accounts Payable that shows the credit of $5,600 dated Jan 2. The Checking Account, Factory Overhead, and Owner's Capital t-accounts are also shown with their respective balances of $96,500 debit, $3,500 debit, and $100,000 credit.\" width=\"624\" height=\"157\" \/><\/p>\n<p>Then the company bought sugar, salt, and other indirect raw materials:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 02<\/td>\n<td class=\"highlight\">Raw Materials &#8211; indirect<\/td>\n<td class=\"r highlight\">600<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Accounts Payable<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">600<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Purchased materials on account.<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1671 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162511\/6.3.1-d.png\" alt=\"A journal entry dated January 2 shows a debit of $600 to Raw Materials - indirect and a credit of $600 to Accounts Payable with the note \u201cPurchased materials on account\u201d. The debit portion of the journal entry points to a t-account for Raw Materials - indirect that shows the debit of $600 dated Jan 2. The credit portion of the journal entry points to a t-account for Accounts Payable that shows the credit of $600 dated Jan 2, which in addition to the $5,600 credit leads to an ending credit balance of $6,200. The Checking Account, Raw Materials - direct, Factory Overhead, and Owner's Capital t-accounts are also shown with their respective balances of $96,500 debit, $5,600 debit $3,500 debit, and $100,000 credit.\" width=\"624\" height=\"220\" \/><\/p>\n<p>And on January 3rd, the Mixing Department production manager submitted a raw materials requisition order to the inventory manager for 500 pounds of flour and 375 pounds of butter\u2014enough raw materials to mix up a batch of 750 pie crusts. This results in a journal entry that moves the cost of the materials from raw materials to work in process. Five hundred pounds of flour that cost $0.60 per pound = $300, and 375 pounds of butter at $1.20 per pound = $450, which is $750 total, which comes to $1 in raw materials per pie shell (each shell takes \u2154 pound of flour and half a pound of butter). These would then be the equivalent of standard costs and standard quantities.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 03<\/td>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">750<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">750<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Started batch 1 &#8211; moved raw materials into production<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1672 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162536\/6.3.1-e.png\" alt=\"A journal entry dated January 3 shows a debit of $750 to Work in Process and a credit of $750 to Raw Materials - direct with the note \u201cStarted batch 1 - moved raw materials into production\u201d. The debit portion of the journal entry points to a t-account for Work in Process - Mixing that shows the debit of $750 dated Jan 3. The credit portion of the journal entry points to a t-account for Raw Materials - direct that shows the credit of $750 dated Jan 3, which in addition to the $5,600 debit leads to an ending debit balance of $4,850. The Checking Account, Raw Materials - indirect, Accounts Payable, Factory Overhead, and Owner's Capital t-accounts are also shown with their respective balances of $96,500 debit, $600 debit, $6,200 credit, $5,600 debit, $3,500 debit, and $100,000 credit.\" width=\"624\" height=\"224\" \/><\/p>\n<\/div>\n<p>By crediting the asset account Raw Materials &#8211; direct and debiting the asset account Work in Process &#8211; Mixing, the cost of the raw materials are \u201creassigned\u201d from the inventory pool to the process.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1673 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162557\/6.3.1-f.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Raw Materials - direct that shows the credit of $750 dated Jan 3, and points to a debit of $750 dated Jan 3 on the Work in Process - Mixing t-account.\" width=\"624\" height=\"427\" \/><\/p>\n<p>You can review the rules of debit and credit by watching this video:<\/p>\n<p><iframe loading=\"lazy\" id=\"oembed-1\" title=\"Debits and Credits MADE EASY with ADEx LER\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/ICDJrsg4abg?feature=oembed&#38;rel=0\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3-us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/DebitsAndCreditsMadeEasyWithADExLER_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;Debits and Credits MADE EASY with ADEx LER&#8221; here (opens in new window)<\/a>.<\/p>\n<p>The company started another batch on January 15th:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 15<\/td>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">750<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">750<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Started batch 2 &#8211; moved raw materials into production<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>A third batch on the 21st:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 21<\/td>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">750<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">750<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Started batch 3 &#8211; moved raw materials into production<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>And a fourth batch on the 28th:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 28<\/td>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">750<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">750<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Started batch 4 &#8211; moved raw materials into production<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Resulting in the following ledger balances:<\/p>\n<div id=\"attachment_1674\" style=\"width: 634px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1674\" class=\"wp-image-1674 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162625\/6.3.1-g.png\" alt=\"See caption for link to long description.\" width=\"624\" height=\"511\" \/><\/p>\n<p id=\"caption-attachment-1674\" class=\"wp-caption-text\">See the <a href=\"https:\/\/docs.google.com\/document\/d\/1QVkWfxzEKMn0C1H_TwbzVeIkeVTv9qXqseDKcNdquZ8\/edit?usp=sharing\" target=\"_blank\" rel=\"noopener\">image long description<\/a> here.<\/p>\n<\/div>\n<p>At the end of the month, a physical count of the indirect raw materials (sugar, salt, etc.) revealed that there was $200 (at original cost) of supplies left in those bins, so the accountants made the following entry to factory overhead:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Factory Overhead<\/td>\n<td class=\"r highlight\">400<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials &#8211; indirect<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">400<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>adjust raw materials inventory<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Which, when posted, moved the cost of indirect raw materials to factory overhead:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1675 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162648\/6.3.1-h.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Raw Materials - indirect that shows the credit of $400 dated Jan 31, and points to a debit of $400 dated Jan 31 on the Factory Overhead t-account.\" width=\"624\" height=\"523\" \/><\/p>\n<p>Meanwhile, the baking\/packaging department used 2,400 pie tins that cost $0.25 each. They add them at the end of the process as they are packaging because the pie shells are cooked upside-down on a baking mold. The tins are part of final preparation for freezing and shipping. Although the tins were used as each batch was completed, we\u2019ll just make one journal entry at the end of the period.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Work-in-process &#8211; Baking\/Packaging<\/td>\n<td class=\"r highlight\">600<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">600<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Record raw materials used in packaging<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1676 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162716\/6.3.1-i.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Raw Materials - direct that shows the credit of $600 dated Jan 31, and points to a debit of $600 dated Jan 31 on the Work in Process - Baking\/Packaging t-account.\" width=\"624\" height=\"523\" \/><\/p>\n<p>Also on the 31st, the payroll department calculated the wages owed to workers. Based on the time cards, wages were split as follows:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Work-in-process &#8211; Mixing<\/td>\n<td class=\"r highlight\">1,440<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">Work-in-process &#8211; Baking\/Packaging<\/td>\n<td class=\"r highlight\">1,100<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">Factory Overhead<\/td>\n<td class=\"r highlight\">900<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Wages Payable<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">3,440<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>To accrue factory wages<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1677 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162738\/6.3.1-j.png\" alt=\"A journal entry dated January 31 shows a debit of $1,440 to Work in Process - Mixing, a debit of $1,100 to Work in Process - Baking\/Packaging, a debit of $900 to Factory Overhead, and a credit of $3,440 to Wages Payable with the note \u201cTo accrue factory wages\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"624\" height=\"337\" \/><\/p>\n<p>The company allocated Manufacturing Overhead to the Mixing Department based on Direct Machine Hours at a rate of $0.50 per hour. Machine hours for January were 3,600, resulting in an allocation of $1,800 of factory overhead to the mixing department.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Work-in-process &#8211; Mixing<\/td>\n<td class=\"r highlight\">1,800<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Factory Overhead<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">1,800<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Allocate factory overhead<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1678 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162808\/6.3.1-k.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Factory Overhead that shows the credit of $1,800 dated Jan 31, and points to a debit of $1,800 dated Jan 31 on the Work in Process - Mixing t-account.\" width=\"325\" height=\"402\" \/><\/p>\n<p>We can now create the production cost report for the mixing department to determine the cost of product transferred out to baking\/packaging:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>Dad&#8217;s Perfect Pies<br \/>\nProduction Cost Report &#8211; Mixing Department<br \/>\nMonth Ended January 31<\/caption>\n<tbody>\n<tr>\n<td><\/td>\n<td><\/td>\n<td class=\"c\" colspan=\"2\">Equivalent Units<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td style=\"font-weight: bold;\" colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>UNITS<\/strong><\/td>\n<td class=\"r\">Physical Units<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\n<td class=\"r\">0<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Started in production<\/td>\n<td class=\"r\">3,000<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total units to account for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">450<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total units accounted for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td style=\"font-weight: bold;\" colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>COSTS<\/strong><\/td>\n<td class=\"r\">Direct Materials<\/td>\n<td class=\"r\">Conversion Costs<\/td>\n<td class=\"r\">Total Costs<\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0&#8211;<\/td>\n<td class=\"r\">$\u00a0 \u00a0\u00a0 \u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 &#8211;<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Costs added during the period<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a03,000<\/td>\n<td class=\"r\">$ \u00a0 3,240<\/td>\n<td class=\"r\">$ 6,240<\/td>\n<\/tr>\n<tr>\n<td>Total costs to account for<\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a03,000<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a03,240<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td>Divided by: Total EUP<\/td>\n<td><\/td>\n<td class=\"r\">\u00a0 3,000<\/td>\n<td class=\"r\">\u00a0 2,700<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Cost per equivalent unit<\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0\u00a0\u00a01.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0\u00a01.20<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs accounted for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\n<td><\/td>\n<td class=\"r highlight\">$\u00a0 2,250<\/td>\n<td class=\"r highlight\">$\u00a0 \u00a02,700<\/td>\n<td class=\"r highlight\">$\u00a04,950<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 \u00a0750<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 540<\/td>\n<td class=\"r\">$\u00a01,290<\/td>\n<\/tr>\n<tr>\n<td>Total costs accounted for<\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 3,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a03,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>And then journalize and post the transfer:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Work-in-process &#8211; Baking\/Packaging<\/td>\n<td class=\"r highlight\">4,950<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Work-in-process &#8211; Mixing Dept<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">4,950<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Record transfer of pie shells<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1679 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162834\/6.3.1-l.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Work in Process - Mixing that shows the credit of $4,950 dated Jan 31, and points to a debit of $4,950 dated Jan 31 on the Work in Process - Baking\/Packaging t-account.\" width=\"328\" height=\"429\" \/><\/p>\n<p>Next, we allocate factory overhead to the baking\/packaging department. In this example, we\u2019ll use a rate of $30\/machine-hour against 100 machine hours for a total allocation of $3,000. Using standard costs like this usually leaves some under or over-allocated factory overhead that we would eventually have to account for, but in this example, we will be allocating all of the factory overhead with no leftover.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Work-in-process &#8211; Baking\/Packaging<\/td>\n<td class=\"r highlight\">3,000<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Factory Overhead<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">3,000<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Allocate factory overhead to baking<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1680 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162854\/6.3.1-m.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Factory Overhead that shows the credit of $3,000 dated Jan 31, and points to a debit of $3,000 dated Jan 31 on the Work in Process - Baking\/Packaging t-account.\" width=\"326\" height=\"472\" \/><\/p>\n<p>And now we can complete the production cost report for the baking\/packaging department:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>Dad&#8217;s Perfect Pies<br \/>\nProduction Cost Report &#8211; Baking\/Packaging Department<br \/>\nMonth Ended January 31<\/caption>\n<tbody>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">Equivalent Units<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>UNITS<\/strong><\/td>\n<td class=\"r\">Physical Units<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Transferred In<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Beginning work-in-process<\/td>\n<td class=\"r\">0<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Transferred in from mixing<\/td>\n<td class=\"r\">2,250<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total units to account for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"6\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Completed and transferred out<\/td>\n<td class=\"r\">2,000<\/td>\n<td class=\"r\">2,000<\/td>\n<td class=\"r\">2,000<\/td>\n<td class=\"r\">2,000<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Ending work-in-process<\/td>\n<td class=\"r\">250<\/td>\n<td class=\"r\">250<\/td>\n<td class=\"r\">0<\/td>\n<td class=\"r\">50<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total units accounted for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,050<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>COSTS<\/strong><\/td>\n<td><\/td>\n<td class=\"r\">Transferred In<\/td>\n<td class=\"r\">Direct Materials<\/td>\n<td class=\"r\">Conversion Costs<\/td>\n<td class=\"r\">Total Costs<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>Beginning work-in-process<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0 \u00a0\u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0 \u00a0\u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 &#8211;<\/td>\n<\/tr>\n<tr>\n<td>Costs added during the period<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 4,950<\/td>\n<td class=\"r\">$\u00a0 \u00a0 600<\/td>\n<td class=\"r\">$\u00a0 4,100<\/td>\n<td class=\"r\">$ 9,650<\/td>\n<\/tr>\n<tr>\n<td>Total costs to account for<\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 4,950<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 600<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a04,100<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 9,650<\/td>\n<\/tr>\n<tr>\n<td>Divided by: Total EUP<\/td>\n<td><\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 2,250<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a02,000<\/td>\n<td class=\"r\">\u00a0 \u00a0 2,050<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Cost per equivalent unit<\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a02.20<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a00.30<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a02.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"6\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs accounted for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td class=\"highlight\">Completed and transferred out<\/td>\n<td><\/td>\n<td class=\"r highlight\">$\u00a0 \u00a04,400<\/td>\n<td class=\"r highlight\">$ \u00a0\u00a0 600<\/td>\n<td class=\"r highlight\">$\u00a0 4,000<\/td>\n<td class=\"r highlight\">$ 9,000<\/td>\n<\/tr>\n<tr>\n<td>Ending work-in-process<\/td>\n<td><\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0550<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0\u00a0 100<\/td>\n<td class=\"r\">$\u00a0 \u00a0650<\/td>\n<\/tr>\n<tr>\n<td>Total costs accounted for<\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 4,950<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0600<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a04,100<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 9,650<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Notice that the total costs to be accounted for are taken from the general ledger account and that we are transferring out 2,000 completed units at a total cost of $9,000, which is $4.50 per unit.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Finished Goods Inventory<\/td>\n<td class=\"r highlight\">9,000<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 \u00a0 Work-in-process &#8211; Baking\/Packaging<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">9,000<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Record cost of completed units transferred to storage<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1681 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14162921\/6.3.1-n.png\" alt=\"Several t-accounts are shown with activity and ending balances. An arrow points from the t-account for Work in Process - Baking\/Packaging that shows the credit of $9,000 dated Jan 31, and points to a debit of $9,000 dated Jan 31 on the Finished Goods Inventory t-account.\" width=\"326\" height=\"589\" \/><\/p>\n<p>To finish off the cycle, let\u2019s say we sold 1,600 pie shells at $6 per shell, to a wholesaler\/distributor on the last day of the month.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"c\">Jan 31<\/td>\n<td class=\"highlight\">Accounts Receivable<\/td>\n<td class=\"r highlight\">9,600<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 Sales Revenue<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">9,600<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">Cost of Goods Sold<\/td>\n<td class=\"r highlight\">7,200<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0 Finished Goods Inventory<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">7,200<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Record sale of 1600 pie crusts to wholesaler @ $6<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<p>Obviously, there would be many more transactions in a real business, even a small one like this, and there would be selling, general, and administrative costs as well. But we\u2019ll end this example here, with the posting of the sale that records the revenue earned but not yet collected and the cost of the 1,600 shells sold being transferred from Finished Goods to Cost of Goods Sold.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1682 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14163020\/6.3.1-o.png\" alt=\"A journal entry dated January 31 shows a debit of $9,600 to Accounts Receivable, a credit of $9,600 to Sales Revenue, a debit of $7,200 to Cost of Goods Sold, and a credit of $7,200 to Finished Goods Inventory with the note \u201cRecord sale of 1600 pie crust to wholesaler @ $6\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"624\" height=\"453\" \/><\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1698 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14200308\/Screen-Shot-2021-05-14-at-12.56.09-PM-1024x382.png\" alt=\"A graphic titled Process Costing System is shown. On the left is a yellow area containing direct materials, direct labor and manufacturing overhead. To the right are three orange areas labeled Work In Process Inventory, which are further identified as Mixing, Molding, and Packaging. Arrows point from the yellow area to all three orange areas. Arrows also point from Mixing to Molding to Packaging. To the right of Packaging is an arrow pointing to a green area labeled as Finished Goods Inventory. To the right of that is an arrow pointing to a purple area labeled as Cost of Goods Sold. The Work in Process and Finished Goods Inventory areas are labeled as being on the Balance Sheet, and the Cost of Goods Sold area is labeled as being on the Income Statement.\" width=\"1024\" height=\"382\" \/><\/p>\n<p>Here are the final account tallies from the general ledger showing that debits equal credits:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<tbody>\n<tr>\n<td>Dad&#8217;s Perfect Pies<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Trial Balance<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Jan 31<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>DR<\/td>\n<td>CR<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Checking Account<\/td>\n<td class=\"r\">96,500<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Accounts Receivable<\/td>\n<td class=\"r\">9,600<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Raw Materials &#8211; direct<\/td>\n<td class=\"r\">2,000<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Raw Materials &#8211; indirect<\/td>\n<td class=\"r\">200<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Work in Process &#8211; Mixing<\/td>\n<td class=\"r\">1,290<\/td>\n<td><\/td>\n<td>see production cost report<\/td>\n<\/tr>\n<tr>\n<td>Work in Process &#8211; Baking\/Packaging<\/td>\n<td class=\"r\">650<\/td>\n<td><\/td>\n<td>see production cost report<\/td>\n<\/tr>\n<tr>\n<td>Finished Goods<\/td>\n<td class=\"r\">1,800<\/td>\n<td><\/td>\n<td>400 finished pie shells at $4.50 ea<\/td>\n<\/tr>\n<tr>\n<td>Accounts Payable<\/td>\n<td><\/td>\n<td class=\"r\">6,200<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Wages Payable<\/td>\n<td><\/td>\n<td class=\"r\">3,440<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Owner&#8217;s Capital<\/td>\n<td><\/td>\n<td class=\"r\">100,000<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Sales Revenue<\/td>\n<td><\/td>\n<td class=\"r\">9,600<\/td>\n<td>1600 shells @$6.00 each<\/td>\n<\/tr>\n<tr>\n<td>Cost of Goods Sold<\/td>\n<td class=\"r\">7,200<\/td>\n<td><\/td>\n<td>1600 shells @ $4.50 each<\/td>\n<\/tr>\n<tr>\n<td>Factory Overhead<\/td>\n<td class=\"r\">&#8211;<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>119,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>119,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>And a reconciliation of the direct raw materials purchased, used, and remaining:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<tbody>\n<tr>\n<td>Direct Materials Inventory Count &#8211; Jan 31<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>Flour<\/td>\n<td>Butter<\/td>\n<td>Tins<\/td>\n<\/tr>\n<tr>\n<td>Purchased, in pounds<\/td>\n<td class=\"r\">4,000<\/td>\n<td class=\"r\">2,000<\/td>\n<td class=\"r\">3,200<\/td>\n<\/tr>\n<tr>\n<td>used for batch 1<\/td>\n<td class=\"r\">(500)<\/td>\n<td class=\"r\">(375)<\/td>\n<td class=\"r\">(800)<\/td>\n<\/tr>\n<tr>\n<td>used for batch 2<\/td>\n<td class=\"r\">(500)<\/td>\n<td class=\"r\">(375)<\/td>\n<td class=\"r\">(800)<\/td>\n<\/tr>\n<tr>\n<td>used for batch 3<\/td>\n<td class=\"r\">(500)<\/td>\n<td class=\"r\">(375)<\/td>\n<td class=\"r\">(800)<\/td>\n<\/tr>\n<tr>\n<td>used for batch 4<\/td>\n<td class=\"r\">(500)<\/td>\n<td class=\"r\">(375)<\/td>\n<td class=\"r\">0<\/td>\n<\/tr>\n<tr>\n<td>Left<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>2,000<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>500<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>800<\/td>\n<\/tr>\n<tr>\n<td>Cost<\/td>\n<td class=\"r\">$0.60<\/td>\n<td class=\"r\">$1.20<\/td>\n<td class=\"r\">$0.25<\/td>\n<\/tr>\n<tr>\n<td>Remaining ($2,000 total)<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$1,200.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$600.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$200.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Notice that the $1,290 of ending work-in-process for the mixing department ties to the production cost report, as does the ending work in process of $650 for the baking\/packaging department.<\/p>\n<p>By reconciling and proving each account, financial and managerial accountants verify that the information fairly represents the actual costs and results of operations.<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=6352572&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=aN-9PhQvmjE&amp;video_target=tpm-plugin-fm3k653k-aN-9PhQvmjE\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/ProcessCostingJournalEntries_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;Process Costing Journal Entries&#8221; here (opens in new window)<\/a>.<\/p>\n<p>Before we take a final look at the production cost report from an analysis standpoint, check your understanding of the recording process that gives us the accurate information we need to track costs.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm219053\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=219053&theme=oea&iframe_resize_id=ohm219053\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-934\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Journal Entries. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Cost Flows in a Process Cost System, from Accounting Principles: A Business Perspective. <strong>Authored by<\/strong>: James Don Edwards, University of Georgia &amp; Roger H. Hermanson, Georgie State University. <strong>Provided by<\/strong>: Endeavour International Corporation. <strong>Project<\/strong>: The Global Text Project. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Debits and Credits MADE EASY with ADEx LER. <strong>Authored by<\/strong>: Leila Gharani. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/ICDJrsg4abg\">https:\/\/youtu.be\/ICDJrsg4abg<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><li>Process Costing Journal Entries. <strong>Authored by<\/strong>: Edspira. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/aN-9PhQvmjE\">https:\/\/youtu.be\/aN-9PhQvmjE<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":11,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Journal Entries\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Debits and Credits MADE EASY with ADEx LER\",\"author\":\"Leila Gharani\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/ICDJrsg4abg\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"copyrighted_video\",\"description\":\"Process Costing Journal Entries\",\"author\":\"Edspira\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/aN-9PhQvmjE\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"cc\",\"description\":\"Cost Flows in a Process Cost System, from Accounting Principles: A Business Perspective\",\"author\":\"James Don Edwards, University of Georgia & Roger H. 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