Q28PGA_b - Horngren'S Financial And Managerial Accounting

Question

Clement Manufacturing makes carrying cases for portable electronic devices. Its costing records yield the following information:

Job No.	Date	Total cost of Job at October 31	Total manufacturing costs added in November
Started	Finished	Sold
1	10/03	10/12	10/13	\(1,300
2	10/03	10/30	11/01	1,400
3	10/17	11/24	11/27	1,000	\)900
4	10/29	11/29	12/03	1,200	1,200
5	11/08	11/12	11/14		650
6	11/23	12/06	12/09		500

Requirements

2. Use the dates in the table to identify the status of each job at October 31 and

November 30. Compute Clement’s account balances at October 31 for Work-in-

Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. Compute,

by job, account balances at November 30 for Work-in-Process Inventory, Finished

Goods Inventory, and Cost of Goods Sold.

Step-by-Step Solution

Answer

Job No.	Started	Finished	Sold	Status as on October 31
1.	10/03	10/12	10/13	Sold
2.	10/03	10/30	11/01	Finished
3.	10/17	11/24	11/27	Work in process
4.	10/29	11/29	12/03	Work in process
5.	11/08	11/12	11/14	Not started
6.	11/23	12/06	12/09	Not started

 

Particulars	Amount ($) as on October 31
Work-in-process inventory	$2,200
Finished goods inventory	$1,400
Cost of goods sold	$1,300

 

Particulars	Amount ($) as on November 30
Work-in-process inventory	$500
Finished goods inventory	$2,400
Cost of goods sold	$5,250

Step 1: Work-in-process inventory as on October 31

$\begin{array}{c}\mathbf{Work}\mathbf{-}\mathbf{in}\mathbf{-}\mathbf{processinventory}\mathbf{=}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{3}\mathbf{+}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{4}\\ =\$1,000+\$1,200\\ =\$2,200\end{array}$

Job no. 3 and 4 is not completed and not sold till October 31. Hence, the total cost of bothe the job is considered as the WIP inventory.

Step 2: Finished goods inventory as on October 31

$\begin{array}{c}\mathbf{Finishedinventory}\mathbf{=}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{2}\\ =\$1,400\end{array}$

Job no. 2 is completed till October 31 but not sold. Hence, only job no. 2 is considered for finished goods inventory.

Step 3: Cost of goods sold as on October 31

$\begin{array}{c}\mathbf{Costofgoodssold}\mathbf{=}\mathbf{TotalcostofJobno}\mathbf{.}\mathbf{1}\\ =\$1,300\end{array}$

Only the job no, 1 is sold before October 31. Hence, only it is considered for calculating the cost of goods sold.

Step 4: Work-in-process inventory as on November 31

$\begin{array}{c}\mathbf{Work}\mathbf{-}\mathbf{in}\mathbf{-}\mathbf{processinventory}\mathbf{=}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{6}\\ =\$500\end{array}$

Out of all the jobs only job no. 6 is under processing as on November 31. As it is completed on 12/09.

Step 5: Finished goods inventory as on November 31

$\begin{array}{c}\mathbf{Finishedinventory}\mathbf{=}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{4}\mathbf{Inoctober}\mathbf{+}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{4}\mathbf{Innovember}\\ =\$1,200+\$1,200\\ =\$2,400\end{array}$

Job no. 4 is completed on 11/29 and sold in December. Hence, the total cost of Job no. 4 is considered while computing the value of finished goods inventory.

Step 6: Cost of goods sold as on November 31

$\begin{array}{c}\mathbf{Costofgoodssold}\mathbf{=}\mathbf{TotalcostofJobno}\mathbf{.}\mathbf{1}\mathbf{+}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{2}\mathbf{+}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{3}\mathbf{+}\mathbf{TotalcostofJobNo}\mathbf{.}\mathbf{5}\\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{300}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{400}\mathbf{+}\left(\$1,000+\$900\right)\mathbf{+}\mathbf{\$}\mathbf{650}\\ =\$5,250\end{array}$

Job no. 1, 2, 3 and 5 is sold till November 30. Hence, the total cost of these jobs are considered as the cost of goods sold.