Transfers to Finished Goods Inventory and Cost of Goods Sold

The movement of completed items from manufacturing to finished goods inventories is shown by arrow line 9. According to the process cost summary, the cost of 100,000 completed Profane units is $24,200. This transfer is documented in the following entry.
CreditDebitDescription
24,200Finished Goods Inventory
24,200Goods in Process Inventory
 To record transfer of completed units.
The credit to Goods in Process Inventory decreases the asset balance to reflect the fact that 100,000 units are no longer being manufactured. These units' costs have been moved to Finished Goods Inventory, resulting in a $24,200 rise in this asset. After this item is submitted, the Goods in Process Inventory account still has a balance of $2,860, which is the amount computed in Step 4 before. The cost of products made is the cost of units shifted from Goods in Process Inventory to Finished Goods Inventory. indicates the activity for this period in the Goods in Process Inventory account The account's ending balance matches the cost attributed to the partially finished units in section.

BalanceCreditDebitDescriptionsJournal page No.Date
4,620

balance
03/31
14,520
9,900
Direct materials usage
04/30
20,220
5,700Direct labor costs incurred 

04/30
27,060
2,680

24,200
6.840
0
Factory overhead applied
Transfer completed product to warehouse

04/30
04/30

The sale of finished items is represented by arrow line 10. Assume GenX sold 106,000 pieces of Profane over this time period and had a starting inventory of completed products of 26,000 units at a cost of $6,292. Assume it also has an ending finished products inventory of 20,000 units at a cost of $4,840. Using this data, we can calculate its cost of goods sold for April, as shown below.

Beginning finished goods inventory
+ Cost of goods manufactured this period
=  Cost of goods available for sale
-  Ending finished goods inventory 
= Cost of goods sold
$6,292
24,200
$30,492
4,840
$25,652
The summary entry to record cost of goods sold for this period follows.
CreditDebitDescription
25,652Cost of Goods Sold
25,652Finished Goods Inventory
To record cost of goods sold for April. 
The Finished Goods Inventory account now appears as shown
BalanceCreditDebitDescriptionsJournal page No.Date
6,292
balance
03/31
30,492
24,200Transfer in cost of goods manufactured04/30
4,84025,652Cost of goods sold
04/30
Cost Flows Summary
The exhibit depicts GenX’s production cost flows in April. Each of these cost flows, as well as the entries used to record them, has been discussed. The movement of expenses through the accounts corresponds to the flow of manufacturing activities and goods.
Transfers to Finished Goods Inventory and Cost of Goods Sold
Resources : fundamental accounting principles 20th edition (pdf) John J. Wild , Ken W. Shaw Barbara Chiappetta
Comments



Font Size
+
16
-
lines height
+
2
-