Question

Wyman Corporation uses a process costing system. The company manufactured certain goods at a cost of $800 and sold them on credit to Percy Corporation for $1,075. The complete journal entry to be made by Wyman at the time of this sale is:

Answer 1

Answer:

Accounts receivable (Dr.)                          $1,075

                Sales revenue (Cr.)                                          $1,075

Cost of goods sold (Dr.)                                800

                Finished goods (Cr.)                                            800

where

Dr. = Debit

Cr. = Credit

Explanation:

The inventory account of a manufacturing firm has three sub-accounts: Raw materials, Work-in-process, and Finished goods. The goods purchased by the company were sold without any work done. It means that they were purchased in finished form, so, the company will record these goods in its finished goods inventory. When goods are sold, we have to record sales and receivable. AND on the same time, under perpetual inventory system, the cost of goods that are sold and inventory account are also adjusted to reflect the changes.

Answer 2

Answer:

Debit Accounts Receivable $1,075; credit Sales $1,075; debit Cost of Goods Sold $800; credit Finished Goods Inventory $800.

Explanation:

Process costing system in accounting is one that allocated cost based on processes in the company. For example purchase of raw materials has its associated cost, an this is attributed to the processes of purchasing raw materials.

In this scenario when the company manufactures at $800 cost, the manufacturing process involves a reduction in inventory (finished goods) and a an increase in cost of goods sold. So we credit Finished Goods Inventory and debit cost of goods sold.

When the product is sold on credit for $1,075, we debit account recievable to show we have an increase in recievable income. We also credit sales to show an increase in sales.