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Stefan Ceramics is in the business of selling ceramic vases. It has two​ departments, molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing​ department, which designs it as per the requirement of the customers. During the month of​ July, molding department purchased 720 kgs of tungsten carbide at​ $280 per kg. It started manufacture of​ 4,200 vases and completed and transferred​ 3,800 vases during the month. It has 400 vases in the process at the end of the month. It incurred direct labor charges of​ $1,500 and other manufacturing costs of​ $1,300, which included electricity costs of​ $300. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was​ 50% complete in respect of conversion costs. Which of the following journal entry would record the tungsten carbide purchased and used in production during​ July?

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Answer:

The following entries would be made.

Stefan Ceramics

Sr. No Particulars Debit credit

1 Merchandise Inventory 291600

Accounts Payable/ Cash 291600

For purchase of 720 kgs of tungsten carbide at​ $280 per kg (720*280=291600)

Accounts Payable or cash depending on whether material was purchased for cash or through accounts payable( creditors).

2 Work In Process 291600 Dr

Merchandise Inventory 291600 Cr

For use of 720 kgs of tungsten carbide . As there is no ending inventory the whole of the material is charged to production.

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