Q8SE - Horngren'S Financial And Managerial Accounting

Question

Lincoln Company completed jobs that cost \(38,000 to produce. In the same period,the company sold jobs for \)88,000 that cost $42,000 to produce. Prepare the journalentries for the completion and sales of the jobs. All sales are on account.

Step-by-Step Solution

Answer

Date	Particulars	Debit ($)	Credit ($)
1.	Finished goods inventory	38,000
	Work in process inventory		38,000
2.	Account receivable	88,000
	Sales revenue		88,000
3.	Cost of good sold	42,000
	Finished goods inventory		42,000

Recording of finished goods in the books of accounts

When the product is completed in manufacturing then the whole cost of manufacturing is transferred to the finished goods. It is recorded as by debiting the finished goods inventory and crediting the work in process inventory.

Recording the journal entry when sale is made

When the sale of goods is made on account, the account receivable account is debited and the sales revenue account is credited. 

And, for recording the cost of the goods sold, cost of goods sold is debited and the finished goods inventory is credited.