COST 2

The decision was made to use a process costing system. The first month of operation went fairly smoothly, and the CFO is ready to prepare her journal entries but asked for your help because she has not done this before for a manufacturing company.

PART 1:

Using only the data in the chart, prepare the proper journal entries—including a date and notes showing any calculations—to record the following:

• Labor
• Direct material going into the work in progress (WIP) account
• Manufacturing overhead all being credited to accounts payable

Part 2

You, the CFO, and the rest of the accounting department now need to write a memo summarizing the data from the first month of using the process costing system operation.

• Prepare the journal entries to record the closing-out of the balance in manufacturing overhead to the appropriate accounts, and show any necessary calculations in the notes of the journal entry.