Maurice Tutor

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Category > Accounting Posted 12 Jul 2017 My Price 6.00

Production Cost Report and Adjust Inventory Balances

Prepare a Production Cost Report and Adjust Inventory Balances: Weighted-Average Method

Elmhurst Parts’s initial and unaudited records show the following ending inventory balances, which must be adjusted to actual costs:

 

Units

Unaudited Costs

Work-in-process inventory

120,000

$793,152

Finished goods inventory

20,000

337,560

 As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available:

 

 

Costs

 

Units

Direct Materials

Direct Labor

Beginning inventory

 

 

 

(80% complete as to labor)

80,000

$ 240,000

$ 546,000

Units started

400,000

 

 

Current costs

 

1,560,000

2,208,000

Units completed and transferred

 

 

 

to finished goods inventory

360,000

 

 

Required

a. Prepare a production cost report for Elmhurst using the weighted-average method.

b. Show the journal entry required to correct the difference between the unaudited records and actual ending balances of Work-in-Process Inventory and Finished Goods Inventory. Debit or credit Cost of Goods Sold for any difference.

c. If the adjustment in requirement (b) is not made, will the company’s income and inventories be overstated or understated?

Answers

Maurice Tutor
(5)
Status NEW Posted 12 Jul 2017 08:07 AM My Price 6.00

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