Question

Hornsby has a single production department, and uses a process-costing system. The balance in its Work-in-Process account on January 1 was $68,000. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hornsby should make a journal entry on December 31 that includes:
1. a debit to Work-in-Process Inventory for $432,000. 0
2. a debit to Finished -Goods Inventory for $432,000. 0
3. a credit to Work-in-Process Inventory for $86,000. 0
4. a debit to Cost of Goods Sold for $432,000. 0
5. a debit to Finished-Goods Inventory for $86,000.

Answer 1

Answer:

Correct option is 02.

Explanation:

Cost of finished goods inventory = Work in process beginning + Direct material, Direct labor and Manufacturing overhead - Work in process ending

= 68,000+450,000-86,000

= $432,000

Hence, the journal entry on December 31, will be as under:

Date                 General Journal                  Debit           Credit

December 31         Finished goods inventory $432,000  

                               Work in process inventory                   $432,000