Question

Cost of Production and Journal Entries Lighthouse Paper Company manufactures newsprint. The product is manufactured in two departments, Papermaking and Converting. Pulp is first placed into a vessel at the beginning of papermaking production. The following information concerns production in the Papermaking Department for March: Account Work in Process-Papermaking Department Account No. Balance Date Item Debit Credit Debit Credit Mar 330,750 1 Bal., 2,600 units, 35% completed 31 Direct materials, 105,000 units 31 Direct labor 31 Factory overhead 31 Goods transferred, 103,900 units 31 Bal., 3,700 units, 80% completed 9,139 339,889 380,449 40,560 54,795 435,244 ? ? al. Prepare the March journal entry for the Papermaling Department for the materials charged to production Work In Process-Papermaking Department ✓ Materials-Pulp

Answer 1

Solution:

a. 1)

No.	General Journal	Debit ($)	Credit ($)
1.	Work in process - Papermaking department	330,750
	Materials Pulp		330,750

a.2.)

No.	General Journal	Debit ($)	Credit ($)
2.	Work in process - papermaking department	95,355
	Wages payable		40,560
	Factory overhead		54,795

a.3)

First we calculate completed production transferred to the converting department.

Equivalent units:

	Physical Units	Materials	Conversion
Beginning inventory	2,600	0	1,690 (2,600 × 65%)
Started and completed (103,900 - 2,600)	101,300	101,300	101,300
Ending inventory	3,700	3,700	2,960 (3,700 × 80%)
Total	107,600	105,000	105,950

Cost per equivalent unit:

	Materials	Conversion
Cost incurred during March (a)	$330,750	$95,355
Equivalent units (b)	105,000	105,950
Cost per equivalent unit (a) ÷ (b)	$3.15	$0.9

Cost of beginning work in process:
Beginning balance	$9,139
Cost incurred during March (1690 × $0.9)	$1,521
Cost of beginning work in process	$10,660
Cost of units started and completed:
Materials (101,300 × $3.15)	$319,095
Conversion (101,300 × $0.9)	$91,170
Cost of beginning work in process	$410,265
Cost of goods transferred	$420,925
Cost of ending work in process:
Materials (3,700 × $3.15)	$11,655
Conversion (2,960 × $0.90)	$2,664
Cost of ending work in process	$14,319

a.3)

No.	General Journal	Debit ($)	Credit ($)
3.	Work in process - Converting Department	420,925
	Work in process - Papermaking Department		420,925

b.)

Work in process - papermaking department March 31 balance = $14,319

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