During the current month, KRC Corporation completed Job 109 and Job 112. Job 109 cost $19,000 and Job 112 costs $27,000. Job 112 was sold on account for $42,000. Journalize the entries for the completion of the two jobs and the sale of Job 112.
Finished Goods Inventory
46,000
Work in Process Inventory
46,000
Accounts Receivable
42,000
Sales
42,000
Cost of Goods Sold
27,000
Finished Goods Inventory
27,000
The Correct Answer and Explanation is :
To journalize the entries for the completion of Job 109 and Job 112 and the sale of Job 112, we need to break down each transaction.
1. Completion of Job 109:
When a job is completed, the cost associated with the job is transferred from Work in Process (WIP) Inventory to Finished Goods Inventory. Job 109 costs $19,000, so the following journal entry is made:
Journal Entry:
- Debit Finished Goods Inventory: $19,000
- Credit Work in Process Inventory: $19,000
This entry records the movement of the completed job from WIP to Finished Goods.
2. Completion of Job 112:
Similarly, Job 112 was completed with a cost of $27,000. The journal entry for transferring the cost of Job 112 to Finished Goods Inventory is:
Journal Entry:
- Debit Finished Goods Inventory: $27,000
- Credit Work in Process Inventory: $27,000
This transaction reflects the completion of Job 112 and its movement to Finished Goods Inventory.
3. Sale of Job 112:
Job 112 was sold on account for $42,000. The sale involves two parts: recognizing revenue from the sale and recording the cost of goods sold (COGS), which is the cost incurred for the job sold (Job 112, which cost $27,000).
Journal Entries:
- Debit Accounts Receivable: $42,000 (to recognize the amount owed by the customer for the sale)
- Credit Sales: $42,000 (to recognize the revenue from the sale)
This entry records the sale of Job 112 on account.
Then, the cost of Job 112, which is $27,000, is transferred from Finished Goods Inventory to Cost of Goods Sold (COGS):
- Debit Cost of Goods Sold: $27,000 (to recognize the expense related to the sale of Job 112)
- Credit Finished Goods Inventory: $27,000 (to reduce the finished goods inventory since the job has been sold)
Summary of Journal Entries:
- Completion of Job 109:
- Debit Finished Goods Inventory $19,000
- Credit Work in Process Inventory $19,000
- Completion of Job 112:
- Debit Finished Goods Inventory $27,000
- Credit Work in Process Inventory $27,000
- Sale of Job 112:
- Debit Accounts Receivable $42,000
- Credit Sales $42,000
- Debit Cost of Goods Sold $27,000
- Credit Finished Goods Inventory $27,000
These entries accurately reflect the flow of costs and revenue for the completion and sale of the jobs. Finished Goods Inventory is used to track costs for jobs that have been completed but not yet sold. Once the jobs are sold, the corresponding revenue is recorded in Sales, and the associated costs are moved to COGS.