1.
Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of
$68,000 on January 1. The account was charged with direct materials, direct labor, and
manufacturing overhead of $450,000 throughout the year. If a review of the accounting records
determined that $86,000 of goods were still in production at year-end, Hamilton should make a
journal entry on December 31 that includes:
a debit to Cost of Goods Sold for $432,000.
a credit to Finished-Goods Inventory for $432,000.
a credit to Work-in-Process Inventory for $432,000.
a debit to Finished-Goods Inventory for $86,000.
a credit to Work-in-Process Inventory for $86,000.
Solution
a credit to Work-in-Process Inventory for $432,000. Since the WIp would be transferred to
Finished goods at year end therefore WIP inventory needs to be credited with 432,000(68000 +
450,000 - 86,000)