PROBLEM 6–14 Equivalent Units; Costing of Inventories; Journal Entries—Weighted- Average Method [LO1, LO2, LO3, LO4]

Zap Rap Inc. is a manufacturer of audio CDs. The company’s chief financial officer is trying to verify the accuracy of the December 31 work in process and finished goods inventories prior to closing the books for the year. He strongly suspects that the year-end dollar balances are incorrect, but he believes that all the other data are accurate. The year-end balances shown on Zap Rap’s books are as follows:

 

 

 

 

conversion 50% complete) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30,000	$95,000
Finished goods, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50,000	$201,000

 

 

 

www.tex-cetera.com

 

 

 

There were no finished goods inventories at the beginning of the year. The company uses the weighted-average method of process costing. There is only one processing department.

A review of the company’s inventory and cost records has disclosed the following data:

 

 

Required:

1.              Determine the equivalent units and the costs per equivalent unit for materials and con- version for the year.

2.              Determine the amount of cost that should be assigned to the ending work in process and finished goods inventories.

3.              Prepare the necessary correcting journal entry to adjust the work in process and finished goods inventories to the correct balances as of December 31.

4.              Determine the cost of goods sold for the year, assuming that there is no underapplied or overapplied overhead.

(CPA, adapted)