Chapter 10 Answer Key

TRUE OR FALSE
1. T
2. T
3. F
4. F
5. F
6. T
7. F
8. T
9. F
10. T
11. T
12. F
13. F
14. F
15. F
16. F
17. F
18. T
19. F
20. T
21. T
22. T
23. F
24. F
25. T
26. T
27. F
28. F
29. F
30. T
31. T
32. F
33. T
34. T
35. T
36. T
37. T
38. T
39. T
40. T
41. F
42. T

Multiple Choice
1. D
 2. D
3. B
4. E
5. C
6. B
7. D
8. C
9. C
10. C
11. B
12. C
13. B
14. A
15. A
16. D
17. D
18. A
19. A
20. A
21. A
22. C
23. C
24. C
25. B
26. B
27. A
28. A/D/C
29. C
30. C
31. B/A/A/A
32. D
33. B
34.

Straight Problems
Problem 1

Solution:
Requirement 1 Requirement 2
500,00 500,00
1 RIP inventory 0   RIP inventory 0
500,00
Accounts Payable 0 Accounts Payable 500,000
To record purchased of
materials   To record purchased of materials

     

2 No Entry   No Entry
      
250,00 250,00
3 Conversion cost – actual 0 Conversion cost - actual 0

Accrued payroll 50,000 Accrued payroll 50,000

200,00
Various Accounts 0 Various Accounts 200,000
To record conversion cost
incurred   To record conversion cost incurred

     
700,00
4 Finished Goods 0 No entry
500,00
RIP inventory (100k x P5) 0
Conversion cost- applied 200,00
(100K x P2) 0
To record cost of completed
transaction

700,00 700,00
Cost of goods sold 0 Cost of goods sold 0
700,00
Finished goods 0 RIP inventory (100k x P5) 500,000
To record cost of 100k units Conversion cost- applied
sold at P5 (100K x P2) 200,000

Cost of goods sold 50,000 Cost of goods sold 50,000

Under applied Under applied Conversion
Conversion cost 50,000 cost 50,000
(actual 250,000 - applied (actual 250,000 - applied
200,000) 200,000)
To record adjustment of COGS To record adjustment of COGS due
due to variance       to variance

The ledger accounts in respect of the above transactions show the following balances:
RIP inventory 0
Finished goods 0
Conversion cost – under applied 50,000

Problem 2

Solution:
Requirement 1 Requirement 2
1 RIP inventory 8,470,000   RIP inventory 8,470,000
  Accounts Payable 8,470,000 Accounts Payable 8,470,000
To record purchased of
  To record purchased of materials   materials
       
2 Conversion cost - actual 6,748,000 Conversion cost - actual 6,748,000
  Accrued payroll 2,695,000 Accrued payroll 2,695,000
  Various Accounts 4,053,000 Various Accounts 4,053,000
To record conversion cost To record conversion cost
  incurred   incurred
        
3 Finished goods 15,120,000 No entry
  RIP inventory (420K x P20) 8,400,000
Conversion cost - applied
  (420K x P16) 6,720,000
  To record completed units    
FG (7K x P36) 252,000
      COGS (413K x P36) 15,120,000
RIP inventory
  (420K x P20) 8,400,000
Conversion cost - applied
4 COGS (413,000 x P36) 14,868,000 (420K x P16) 6,720,000
To record the application of RIP
  Finished goods 14,868,000 and CC to COGS
  To record units sold
 
  COGS 28,000
under applied Conversion
  cost 28,000
  (6,748,000 - 6,720,000)
To record adjustment of COGS
  due to variance  

The ledger accounts in respect of the above transactions show the following balances:
RIP inventory 70,000
Finished goods 252,000
Conversion cost – under applied 28,000

Problem 3
Solution:
Traditional   JIT
1 Materials 880,000 RIP inventory 880,000
Accounts Payable 880,000 Accounts Payable 880,000
   
Work in Process
2 Inventory 850,000 No entry
Materials 850,000  
   
Conversion cost account -
3 Payroll 100,000 Actual 422,000
Accrued Payroll 100,000 Accrued Payroll 100,000
Various Accounts 322,000
Work in Process
Inventory 100,000
Payroll 100,000

Factory Overhead
4 Control 322,000
Various Accounts 322,000  
   
5 Work in Process 300,000 No entry
 Inventory
Factory overhead applied 300,000  
   
1,250,00 1,250,00
6 Finished goods 0 Finished goods 0
1,250,00
work in Process 0 RIP 850,000
Conversion cost - applied 400,000
1,190,00
COGS 0
1,190,00 1,190,00
Finished goods 0 COGS 0
        Finished goods 1,190,000

Note: Trigger points determine when entries are recorded in the accounting system.

The ledger accounts in respect of the above transactions show the following balances:
RIP inventory 30,000
Finished goods 60,000
Conversion cost – under applied 22,000

Problem 4
Solution:
Transaction Traditional Backflush Costing
1. Purchase of
materials Materials 96,000 COGS 96,000
Accounts Payable 96,000 Materials 96,000
(24,000 units x P4)  
 
 
2. Incurrence of
conversion costs Conversion Costs 192,000 COGS 192,000
Various Accounts 192,000 Various Accounts 192,000
(24,000 units x P8)  
 
3. Completion of
production WIP Inventory 288,000 No Entry
Materials 96,000  
Conversion Costs 192,000  
 
Finished Goods
Inventory 288,000  
WIP Inventory 288,000  
 
Sales for the month Accounts Receivable 474,000 Accounts Receivable 474,000
Sales 474,000 Sales 474,000
(23,700 units x P20) (23,700 units x P20)
 
Finished Goods
COGS Inventory 3,600
 Finished Goods
Inventory 284,400 COGS 3,600
To record backlashing of costs to FG
(23,700 x P12) 284,400 Inventories)

Problem 5
1. Purchased of Materials RIP Inventory 2,416,000
Accounts Payable 2,416,000

[Link] of Conversion costs Conversion Costs 4,864,000

Various Accounts 4,864,000

3. To record application of Conversion

Costs RIP Inventory 4,800,000
Conversion Costs 4,800,000

Finished Goods
4. To Record Finished goods Inventory 7,200,000
RIP Inventory 7,200,000
(600,000 x P12)

5. To record sale of inventory COGS

Finished Goods
Inventory 7,152,000
(596,000 x P12) 7,152,000

To record adjustment of under-applied

Conversion COGS 64,000
Conversion Costs 64,000
(4,864,000 -
4,800,000)

Accounts Receivable 11,920,000

Sales 11,920,000
(596,000 x P20)

Or Alternative Entry
RIP Inventory 16,000
FG Inventory 48,000
COGS 7,216,000
Accounts Payable 2,416,000
Conversion Costs 4,864,000

Accounts Receivable 11,920,000

Sales 11,920,000
 (596,000 x P20)

Problem 6
Answer
RIP Inventory 375,000
AP 375,000

Conversion Cost 525,000

Various Accounts 525,000

COGS (88,000 x 10) 880,000

FG (2,000 x 10) 20,000
RIP Inventory 375,000
Conversion Cost 525,000

Unit Cost (900,000 / 90,000 units) 10.00

2. P10 x 2,000 units = P20,000
3. P10 x 88,000 units = 880,000

Problem 7
Answer
1.
1 RIP Inventory 906,000
AP 906,000

2 Conversion Cost 1,820,000

Various Accounts 1,820,000

3 RIP Inventory 1,825,000

Conversion Cost Applied 1,825,000

4 FG Inventory 2,700,000
RIP Inventory 2,700,000
(450,000 x 6)

5 COGS 2,682,000
FG Inventory 2,682,000
(447,000 x 6)

Cash 5,364,000
Sales 5,364,000
(447,000 x 12)
 Over Applied Conversion Cost 5,000
COGS 5000

2.
2 Trigger Points
1 NE

2 Same

3 NE

4 RIP Inventory 31,000

FG Inventory (450K x 6) 2,700,000
AP 906,000
Conversion Cost applied 1,825,000

5 same

3.
1 Trigger point
1 NE

2 Same

3 NE

4 NE

5 RIP Inventory 31,000

FG Inventory (3K x 6) 18,000
COGS (447K x 6) 2,682,000
AP 906,000
Conversion Cost applied 1,825,000

Over Applied Conversion Cost 5,000

COGS 5000

4. RIP Inventory 31K; FG 18K