Question

In Mynex Company completes Job No. 26 at a cost of $4,500 and later sells it for $7,000 cash. A correct entry is:________.a. debit Cost of Goods Sold $7,000 and credit Finished Goods Inventory $7,000. b. debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500. c. debit Finished Goods Inventory $7,000 and credit Work in Process Inventory $7,000. d. debit Accounts Receivable $7,000 and credit Sales Revenue $7,000.

Answer 1

Answer:

b. debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500.

Explanation:

In manufacturing accounting, a good under production is held as a Work in Process Inventory. This implies the production of the good is not yet complete. At this stage, the Work in Process Inventory is debited with cost of the good under production.

Immediately the production of the good is complete, the good will be transferred to Finished Goods Inventory. At this stage, the Finished Goods Inventory is debited with the cost of the good which it production has been completed.

From the question, it stated that In Mynex Company completes Job No. 26 at a cost of $4,500 before it later sells it for $7,000 cash. Among all the options given, only correct option is b. debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500.

This is because option b. shows that Job No. 26 has been completed at a cost of $4,500. Based on the explanation above,the company has to debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500.

It should be noted that we are to record the completion of Job No. 26 first, not the sale of it.