Question

The following journal entries are recorded in Kiesha Co.’s process costing system. Kiesha produces apparel and accessories. Overhead is applied to production based on direct labor cost for the period. Prepare a brief explanation (including any overhead rates applied) for each journal entry a through k.

Date	Accounts and Explanation	Debit \(	Credit \)
a.	Raw material inventory	\(52,000
	Account payable		\)52,000
b	Work-in-process inventory	\(42,000
	Raw material inventory		\)42,000
c	Work-in-process inventory	\(32,000
	Factory wages payable		\)32,000
d	Factory overhead	\(6,000
	Factory overhead wages payable		\)6,000
e	Factory overhead	\(12,000
	Cash		\)12,000
f	Factory overhead	\(10,000
	Raw material inventory		\)10,000
g	Factory wages payable	\(38,000
	Cash		\)38,000
h	Work-in-process inventory	\(33,600
	Factory overhead		\)33,600
i	Finished goods inventory	\(88,000
	Work-in-process inventory		\)88,000
j	Accounts receivables	\(250,000
	Sales		\)250,000
k	Cost of goods sold	\(100,000
	Finished goods inventory		\)100,000

Short answer

Transaction	Explanation
a	To record the purchase of raw material.
b	To record the raw material used in the production process.
c	To record the direct labor used in the production process.
d	To record the indirect labor used.
e	To record the cash payment of overheads.
f	To record the usage of an indirect material.
g	To record the payment of factory wages.
h	Record the overhead applied.
i	To record the goods transferred to finished goods inventory.
j	To record the sales of finished goods on account.
k	To record the cost of goods sold.

Step-by-step solution

Definition of Finished Goods Inventory

Finished goods inventory can be defined asa group of goods available for sale to the customer. These goods are reported as current assets on the balance sheet of the business entity.

Explanation for journal entries

1. A debit of raw material inventory will increase the business entity's assets, and credit of account payable will increase the liability of the business entity.
2. A debit of work-in-process inventory will increase the assets, and credit of raw material inventory will decrease the assets.
3. A debit of work-in-process inventory will increase the assets, and credit of factory wages payable will increase the liability.
4. A debit of factory overhead will increase the expenses, and credit of factory wages payable will increase the liability of the business entity.
5. A debit of factory overhead will increase the expenses, and credit of cash will decrease the business entity's assets.
6. A debit of factory overhead will increase the expenses, and credit of raw material inventory will decrease the assets.
7. A debit of factory wages payable will decrease the liability, and a credit of cash will decrease the assets.
8. A debit of work-in-process inventory will increase the assets, and the credit of factory overhead will decrease the expenses.
9. A debit of finished goods inventory will increase the assets, and credit of work-in-process inventory will decrease the assets.
10. A debit of accounts receivable will increase the assets, and credit of sales will increase the revenue of the business entity.
11. A debit of the Cost of goods sold will increase the expenses, and credit of finished goods inventory will decrease the assets.