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.

To record transfer of completed units.

Description	Debit	Credit
Finished Goods Inventory	24,200
Goods in Process Inventory		24,200

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.

Date	Journal page No.	Description	Debit	Credit	Balance
03/31		balance			4,620
04/30		Direct materials usage	9,900		14,520
04/30		Direct labor costs incurred	5,700		20,220
04/30		Factory overhead applied	6.840		27,060
04/30		Transfer completed product to warehouse	0	24,200	2,680

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.

To record cost of goods sold for April.

Description	Debit	Credit
Cost of Goods Sold	25,652
Finished Goods Inventory		25,652

The Finished Goods Inventory account now appears as shown

Date	Journal page No.	Description	Debit	Credit	Balance
03/31		balance			6,292
04/30		Transfer in cost of goods manufactured	24,200		30,492
04/30		Cost of goods sold		25,652	4,840

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.

Resources : fundamental accounting principles 20th edition (pdf) John J. Wild , Ken W. Shaw Barbara Chiappetta