Q.18-2SE - Horngren'S Financial And Managerial Accounting

Question

Question: The Jimenez Toy Company makes wooden toys. The company uses a process costing system. Arrange the company’s accounts in the order the production costs are most likely to flow, using 1 for the first account, 2 for the second, and so on.

Order	Account
	Work-in-process inventory – Packaging
	Cost of goods sold
	Work-in-process inventory – Cutting
	Work-in-process inventory – Finishing
	Finished goods inventory

Step-by-Step Solution

Answer

Answer

Order	Account
1	Work-in-process inventory – Cutting
2	Work-in-process inventory – Packaging
3	Work-in-process inventory – Finishing
4	Finished goods inventory
5	Cost of goods sold

Step 1: Inventory

Inventory means the raw material used by the company in manufacturing the final product which can be consumed by the customers. It is considered as the current asset of the company and shown in the balance sheet.

Step 2: Flow of manufacturing process

The manufacturing process flows from assembly department to cutting department from cutting department to packaging department and then to finishing department. Afterwards, the flow is from finishing department to finished goods inventory and when the goods are sold, it is transferred to the cost of goods sold.

It is clear from the example, the company engaged in manufacturing the puzzles, first assemble the cardboard and the picture with the help of glue. After that the cardboard is cutted into puzzle pieces and transferred to the packaging department for packing. The final packed product is transferred to the finished goods inventory and to the cost of goods sold once the goods are sold to the customers.