Question

Question 2 (30 points, 5 points each) Show the debits and credits for the transactions listed below. The accounts to use to fil in the table are as follows: cash, accounts payable, raw materials inventory, work in progress, finished goods inventory, cost of goods sold, sales revenue, and accounts receivable. Indicate whether the accounts go up or down and how much do they change by following the example given below Example: Order and receive $2,000 of steel from a supplier (don't pay them yet/will pay them after a month) Debit Credit Raw material inventory goes up by S2,000 Account payable goes up by $2,000 (a) Pay the supplier now Debit Credit (b) Move the steel ($2,000) onto the shop floor and start fabrication Debit Credit (c) Incur shop labour costs of $1,000 in making the product and people cash half of their payroll right away Debit Credit (d) Finish fabrication of an item with a cost of $3,000, of which steel cost is $2,000 and shop floor labour is $1,000, and move it to finished product inventory Debit Credit (e) Sell the material to a customer for $4,000 (Note: $1,000 difference between sales revenue and cost of goods sold) Debit Credit

Answer 1

a)	Pay the supplier
	Debit	Credit
	Accounts payable reduced by $ 2,000	Cash reduced by $ 2,000
b)	Move the steel ($ 2,000) onto the shop floor and start fabrication.
	Debit	Credit
	Work in process goes up by $ 2,000	Raw material inventory reduced by $ 2,000
c)	Incur shop labour costs of $ 1,000 in making the product and people cash half of the payroll right away.
	Debit	Credit
	Work in process inventory (labor cost) goes up by $ 1,000	Cash reduced by $ 500
		Salary Payable goes up by $ 500
d)	Finish fabrication of an item with a cost of $ 3,000 , of which steel cost is $ 2,000 and shop floor labour is $ 1,000, and move to the finished product inventory.
	Debit	Credit
	Finished goods inventory goes up by $ 3,000	Work in process inventory reduced by $ 3,000
e)	Sell the material to the customer for $ 4,000
	Debit	Credit
	Accounts receivable goes up by $ 4,000	Sales revenue goes up by $ 4,000
	Debit	Credit
	Cost of goods sold goes up by $ 3,000	Finished goods inventory reduced by $ 3,000