Question MA2.7: The following information is required for questions 7 and 8 ...
The following information is required for questions 7 and 8
The incomplete process account relating to period 4 for a company which manufactures paper is shown below
| Process account | |||||
| Units | $ | Units | $ | ||
| Material | 4,000 | 16,000 | Finished goods | 2,750 | |
| Labour | 8,125 | Normal loss | 400 | 700 | |
| Production overhead | 3,498 | Work in progress | 700 | ||
There was no opening work in process (WIP). Closing WIP, consisting of 700 units, was complete as shown
Materials 100%
Labour 50%
Production overhead 40%
Losses are recognised at the end of the production process and are sold for $1.75 per unit.
Question 7
Given the outcome of the process, which ONE of the following accounting entries is needed in each account to complete the double entry for the abnormal loss or gain?
| Debit | Credit | No entry in this account | |
| Process account | \square | \square | \square |
| Abnormal gain account | \square | \square | \square |
| Abnormal loss account | \square | \square | \square |
Question 8
The value of the closing WIP was $ \boxed{\ \ \ \ \ \ \ \ \ \ \ \ }
Solution 7
Process account = credit; abnormal gain account = no entry in this account; abnormal loss account = debit.
Abnormal loss (4,000 – 2,750 – 400 – 700) units = 150 units
Solution 8
The value of the closing WIP was $4,158.
Statement of equivalent units
| Total units | Material
equiv units |
Labour
equiv units |
Production
overhead equiv units |
|
| Finished goods | 2,750 | 2,750 | 2,750 | 2,750 |
| Normal loss | 400 | __ | __ | |
| Abnormal loss | 150 | 150 | 150 | 150 |
| WIP c/fwd | 700 | 700 | 350 | 280 |
| 3,600 | 3,250 | 3,180 | ||
| $ | $ | $ | ||
| Costs | 16,000 | 8,125 | 3,498 | |
| Scrap value normal loss | 700 | |||
| 15,300 | ||||
| Cost per equivalent unit | $4,25 | $2.50 | $1.10 |
Statement of evaluation of WIP
$
WIP c/fwd – material (700 × $4.25) 2,975
labour (350× $2.50) 875
production overhead (280 × $1.10) 308
4,158