Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Given the following T-accounts summarizing Telstar's production activity for the year, which journal entry correctly records the transfer of completed goods from Work in Process to Finished Goods under a job order costing system?

Debit Raw Materials; Credit Work in Process

Debit Finished Goods; Credit Work in Process

Debit Cost of Goods Sold; Credit Finished Goods

Debit Work in Process; Credit Finished Goods

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Verified step by step guidance

Understand the context of the problem: In a job order costing system, costs are accumulated in the Work in Process account as production progresses. Once goods are completed, these costs are transferred to the Finished Goods account.

Identify the accounts involved: The Work in Process account represents costs for jobs still in production, while the Finished Goods account represents costs for jobs that are completed and ready for sale.

Determine the correct journal entry: When goods are completed, the costs in the Work in Process account are transferred to the Finished Goods account. This requires a debit to Finished Goods (to increase its balance) and a credit to Work in Process (to decrease its balance).

Eliminate incorrect options: The journal entry 'Debit Raw Materials; Credit Work in Process' is incorrect because it represents the transfer of raw materials into production, not the completion of goods. Similarly, 'Debit Cost of Goods Sold; Credit Finished Goods' is incorrect because it represents the sale of goods, not the transfer of completed goods.

Select the correct journal entry: The correct journal entry to record the transfer of completed goods is 'Debit Finished Goods; Credit Work in Process,' as it reflects the movement of costs from production to completed inventory.