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Juli2301 [7.4K]
3 years ago
12

The entry to record the use of direct materials in production would include a A. credit to Finished Goods Inventory. B. debit to

WIP Inventory. C. debit to Raw Materials Inventory. D. debit to Finished Goods Inventory.
Business
1 answer:
earnstyle [38]3 years ago
3 0

Answer:  

B. debit to WIP inventory

Explanation:

The journal entry to record the usage of direct material in production is

Work in Process Inventory                                  Dr.

     To Raw Material Inventory

(Raw materials consumed recorded)

Raw material inventory is an asset. It's consumption should reduce it's balance. A debit increases an asset's balance while a credit reduces it's balance.

Work in process, like raw material is an inventory account i.e an asset. A debit increases their balance whereas a credit reduces it.

Here, raw materials i.e direct material have been issued for production, which would reduce their balance and increase the balance of work in process as finished goods are yet to be made.

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Answer:

MSK Construction Company

a. Journal Entries, under the assumption that MSK recognizes revenue over time and uses costs incurred to measure the extent to which its performance obligation has been satisfied:

20X1:

Debit Work in Process $290,000

Credit Cash Account $290,000

To record the cost incurred for the contract.

Debit Accounts Receivable $260,000

Debit Unbilled Cost of Contract $90,000

Credit Contract Revenue $350,000

To record the amount billed to customer and revenue.

Debit Cash Account $240,000

Credit Accounts Receivable $240,000

To record the cash receipts from customer.

20X2:

Debit Work in Process $150,000

Credit Cash Account $150,000

To record the cost incurred for the contract.

Debit Accounts Receivable $265,000

Credit Unbilled Cost of Contract $90,000

Credit Contract Revenue $175,000

To record the amount billed to customer and corresponding revenue.

Debit Cash Account $285,000

Credit Accounts Receivable $285,000

To record the cash receipts from customer.

b. Journal Entries, under the assumption that MSK recognizes revenue at a point in time when control of the completed factory is transferred to the customer at the end of the project:

20X1:

Debit Work in Process $290,000

Credit Cash Account $290,000

To record the cost incurred for the contract.

Debit Accounts Receivable $260,000

Credit Unearned Revenue $260,000

To record the amount billed to customer.

Debit Cash Account $240,000

Credit Accounts Receivable $240,000

To record the cash receipts from customer.

20X2:

Debit Work in Process $150,000

Credit Cash Account $150,000

To record the cost incurred for the contract.

Debit Accounts Receivable $265,000

Debit Unearned Revenue $260,000

Credit Contract Revenue $525,000

To record the amount billed to customer and revenue.

Debit Cash Account $285,000

Credit Accounts Receivable $285,000

To record the cash receipts from customer.

Explanation:

a) Data and Calculations:

Contract price = $525,000

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Costs incurred during the year              $290,000    $150,000

Estimated additional cost to complete   $145,000         —

Estimated Total costs                              $435,000    $150,000

Billings during the year                             260,000     265,000

Cash collections during the year             240,000      285,000

Revenue Recognition for 20X1:

= incurred cost/Total estimated costs * contract price

= $290,000/$435,000 * $525,000

= $350,000

Revenue Recognition for 20X2:

= $525,000 - $350,000

= $175,000

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Some advantages and limitations of highly cohesive groups are as follows:

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- Communications: more easily to communicate, greater cohesion of the group.

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