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 There was no opening work in process (WIP). Closing WIP, consisting of 700 units, was complete as shown

Question

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	[latex] \square [/latex]	[latex] \square [/latex]	[latex] \square [/latex]
Abnormal gain account	[latex] \square [/latex]	[latex] \square [/latex]	[latex] \square [/latex]
Abnormal loss account	[latex] \square [/latex]	[latex] \square [/latex]	[latex] \square [/latex]

Question 8
The value of the closing WIP was $ [latex] \boxed{\ \ \ \ \ \ \ \ \ \ \ \ } [/latex]

Accepted Answer

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

[latex][/latex] 4,158

	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 MA2.7: The following information is required for questions 7 and 8 ...

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