Final answer:
The correct journal entries involve debiting WIP for the receiving department and crediting WIP for the transferring department. Upon completion, costs are transferred from WIP of the final department to Finished Goods.
Step-by-step explanation:
The question relates to the accounting process for a company with two processing departments and how to record transfers between the departments and to finished goods. When a transfer from one processing department to another takes place, the entry should debit Work in Process (WIP) for the receiving department and credit WIP for the transferring department to reflect the transfer of costs. Once the goods have been completed in the final processing department and are ready to be sold, the costs should then be transferred from WIP of the final department to Finished Goods. Therefore, the correct set of journal entries to record these transactions would include:
- WIP - Dept B xxx
- WIP - Dept A xxx
When the production is completed in Department B and the goods are transferred to finished goods, the correct entry would be:
- Finished Goods xxx
- WIP - Dept B xxx
The first set of entries represents the transfer between processing departments, and the second set represents the transfer from the final processing department to finished goods inventory.