Problem 4-16 Cost Flows [LO1] Nature’s Way, Inc., keeps one of its production fa
ID: 2477957 • Letter: P
Question
Problem 4-16 Cost Flows [LO1]
Nature’s Way, Inc., keeps one of its production facilities busy making a perfume called Essence de la Vache. The perfume goes through two processing departments: Blending and Bottling.
The following incomplete Work in Process account is provided for the Blending Department for March:
The $33,500 beginning inventory in the Blending Department consisted of the following elements: materials, $7,000; direct labor, $4,800; and overhead applied, $21,700.
Costs incurred during March in the Bottling Department were: materials used, $45,000; direct labor, $18,000; and overhead cost applied to production, $111,000.
Prepare journal entries to record the costs incurred in both the Blending Department and Bottling Department during March.
Manufacturing overhead costs for the entire factory were incurred, $616,000. (Credit Accounts Payable and use a single Manufacturing Overhead control account for the entire factory.)
Units that were complete with respect to processing in the Blending Department were transferred to the Bottling Department, $632,000.
Units that were complete with respect to processing in the Bottling Department were transferred to Finished Goods, $790,000.
Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Blending Department’s Work in Process account is given above.) (Record the transactions in the given order.)
After posting the entries to the T-accounts, find the ending balances in the inventory accounts and the manufacturing overhead account.
Nature’s Way, Inc., keeps one of its production facilities busy making a perfume called Essence de la Vache. The perfume goes through two processing departments: Blending and Bottling.
The following incomplete Work in Process account is provided for the Blending Department for March:
Explanation / Answer
1.
Items General Journal Debit Credit
Raw materials were issued for use in production.
Work in Process - Blending 139,600
Work in Process - Bottling 45,000
Raw Materials 184,600
Direct labor costs were incurred.
Work in Process - Blending 83,200
Work in Process - Bottling 18,000
Salaries and Wages Payable 101,200
Manufacturing overhead costs for the entire factory were incurred, $616,000.
Manufacturing Overhead 616,000
Accounts Payable 616,000
Manufacturing overhead was applied to production using a predetermined overhead rate.
Work in Process - Blending 487,000
Work in Process - Bottling 111,000
Manufacturing Overhead 598,000
Units that were complete with respect to processing in the Blending Department were transferred to the Bottling Department, $632,000.
Work in Process - Bottling 632,000
Work in Process - Blending 632,000
Units that were complete with respect to processing in the Bottling Department were transferred to Finished Goods, $790,000.
Finished Goods 790,000
Work in Process - Bottling 790,000
Completed units were sold on account for $1,440,000. The cost of goods sold was $660,000
Accounts Receivable 1,440,000
Sales 1,440,000
Cost of Goods Sold 660,000
Finished Goods 660,000
Post the journal entries from (1) above to T-accounts.
Accounts Receivable
Raw Materials
Work in Process - Blending Department
Work in Process - Bottling Department
bal 72,000
Finished Goods
Manufacturing Overhead
Accounts Payable
Salaries & Wages Payable
Sales
Cost of Goods Sold
a.Raw materials were issued for use in production.
Work in Process - Blending 139,600
Work in Process - Bottling 45,000
Raw Materials 184,600
b.Direct labor costs were incurred.
Work in Process - Blending 83,200
Work in Process - Bottling 18,000
Salaries and Wages Payable 101,200
c.Manufacturing overhead costs for the entire factory were incurred, $616,000.
Manufacturing Overhead 616,000
Accounts Payable 616,000
d.Manufacturing overhead was applied to production using a predetermined overhead rate.
Work in Process - Blending 487,000
Work in Process - Bottling 111,000
Manufacturing Overhead 598,000
e.Units that were complete with respect to processing in the Blending Department were transferred to the Bottling Department, $632,000.
Work in Process - Bottling 632,000
Work in Process - Blending 632,000
f.Units that were complete with respect to processing in the Bottling Department were transferred to Finished Goods, $790,000.
Finished Goods 790,000
Work in Process - Bottling 790,000
g.Completed units were sold on account for $1,440,000. The cost of goods sold was $660,000
Accounts Receivable 1,440,000
Sales 1,440,000
Cost of Goods Sold 660,000
Finished Goods 660,000
2.Post the journal entries from (1) above to T-accounts.
Accounts Receivable
Debit Credit g. 1,440,000Raw Materials
Debit Credit Opening 210,600 a. 184,600 Bal 26,000Work in Process - Blending Department
Debit Credit Opening 33,500 a. 139,600 e. 632,000 b. 83,200 d. 487,000 Bal 111,300Work in Process - Bottling Department
Debit Credit Opening 56,000 a. 45,000 f. 790,000 b. 18,000 d. 111,000 e. 632,000bal 72,000
Finished Goods
Debit Credit f. 790,000 g. 660,000 Bal 130,000Manufacturing Overhead
Debit Credit c. 616,000 d. 598,000 Bal 18,000Accounts Payable
Debit Credit c. 616,000Salaries & Wages Payable
Debit Credit b.. 101,200Sales
Debit Credit g. 1,440,000Cost of Goods Sold
Debit Credit g. 660,000Related Questions
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