Multiple Choice
Which of the following fields are typically found in the 'Reclassify Transactions' screen when preparing journal entries involving debits and credits?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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?
A
Debit Raw Materials; Credit Work in Process
B
Debit Finished Goods; Credit Work in Process
C
Debit Cost of Goods Sold; Credit Finished Goods
D
Debit Work in Process; Credit Finished Goods
Verified step by step guidance1
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.
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