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AlekseyPX
3 years ago
13

Record the following process costing transactions in the general journal

Business
1 answer:
Ber [7]3 years ago
6 0

Answer:

a.Dr Raw Materials Inventory 9,000

Accounts Payable 9,000

b. Dr Work in Process Inventory-Assembly 4,200

Cr Raw Materials Inventory 4,200

Dr Work in Process Inventory-Finishing2,400

Cr Raw Materials Inventory 2,400

c.Dr Work in Process Inventory-Assembly10,800

Cr Cash10,800

d.Dr Manufacturing Overhead 11,200

Cr Property Taxes Payable-Plant 1,700

Cr Utilities Payable 4,800

Cr Prepaid Insurance-Plant 1,100

Cr Accumulated Depreciation-Plant 3,600

e.Dr Work in Process Inventory-Assembly 6,800

Cr Wages Payable 4,700

Cr Manufacturing Overhead 2,100

f.Work in Process Inventory-Finishing 10,700

Cr Wages Payable 4,400

Cr Manufacturing Overhead 6,300

g.Dr Work in Process Inventory-Finishing 10,300

Cr Work in Process Inventory-Assembly10,300

h.Dr Finished Goods Inventory15,100

Cr Work in Process Inventory-Finishing15,100

Explanation:

To Record process costing transactions in the general journal

a. Based on the information given we were told that the Purchase of raw materials of the amount of $9,000 was made which means that the transaction will be recorded as:

Dr Raw Materials Inventory 9,000

Accounts Payable 9,000

b. Based on the information given we were told that the Requisition of direct materials to Assembly Department was the amount of $4,200 while the Finishing Department amount was $2,400 which means that the transaction will be recorded as:

Dr Work in Process Inventory-Assembly 4,200

Cr Raw Materials Inventory 4,200

Dr Work in Process Inventory-Finishing 2,400

Cr Raw Materials Inventory2,400

c. Based on the information given we were told that payment of direct labor was the amount of $10,800 which means that the Journal entry will be:

Dr Work in Process Inventory-Assembly 10,800

Cr Cash10,800

d. Journal entry to record the incurrence of manufacturing overhead costs

Dr Manufacturing Overhead 11,200

(1,700+4,800+1,100+3,600)

Cr Property Taxes Payable-Plant 1,700

Cr Utilities Payable 4,800

Cr Prepaid Insurance-Plant 1,100

Cr Accumulated Depreciation-Plant 3,600

e. Based on the information given we were told that the conversion costs to the Assembly Department include both Direct labor of the amount of $4,700 and Manufacturing overhead of the amount of $2,100 which means that the Journal entry will be:

Dr Work in Process Inventory-Assembly 6,800

(4,700+2,100)

Cr Wages Payable 4,700

Cr Manufacturing Overhead 2,100

f. Based on the information given we were told that conversion costs to the Finishing Department were: Direct labor, $4,400 Manufacturing overhead, $6,300, which means that the transaction will be recorded as:

Work in Process Inventory-Finishing10,700

(6,300+4,400)

Cr Wages Payable4,400

Cr Manufacturing Overhead6,300

g. Based on the information given we were told that the Cost of goods that was completed and transferred out of the Assembly department to the finished goods depatment was the amount of 10,300 which means that the transaction will be recorded as:

Dr Work in Process Inventory-Finishing 10,300

Cr Work in Process Inventory-Assembly10,300

h. Based on the information given we were told that the Cost of goods that was completed and transferred out of the finished goods depatment to finished goods inventory was the amount of 15,100 which means that the Journal entry will be:

Dr Finished Goods Inventory 15,100

Cr Work in Process Inventory-Finishing15,100

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Book Value at the end of Year 3 = $965,000 - $321,634.50 - $428,942.50 - $142,916.50 = $71,506.50

After-tax Salvage Value = Salvage Value - (Salvage Value - Book Value) * Marginal tax rate = $624,000 – ($624,000 - $71,506.50) * 25% = $485,877

Initial Investment in NWC = $19,000

We can now proceed as follows:

a. What is the Year 0 net cash flow?

Year 0 Net Cash Flows = Initial Investment + Initial Investment in NWC = $965,000 + $19,000 = $984,000

b. What are the net operating cash flows in Years 1, 2, 3?

Year 1 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 1) = ($301,000 * (1 – 0.25)) + (0.25 * $321,634.50) = $306,159

Year 2 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 2) = ($301,000 * (1 – 0.25)) + (0.25 * $428,942.50) = $332,986

Year 3 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 3) = ($301,000 * (1 – 0.25)) + (0.25 * $142,916.50) = $261,479

c. What is the additional Year 3- cash flow (i.e. after tax salvage and the return of working capital)?

Additional Year 3- cash flow = NWC recovered + After-tax Salvage Value = $19,000 + $485,877 = $504,877

d. If the project's cost of capital is 12%, should the machine be purchased?

This can be determined from the net present value (NPV) calculated as follows:

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