Harrington Industries, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Harrington should make a journal entry on December 31 that includes:
A) a debit to Cost of Goods Sold for $432,000.
B) a credit to Finished-Goods Inventory for $432,000.
C) a credit to Work-in-Process Inventory for $432,000.
D) a debit to Finished-Goods Inventory for $86,000.
E) a credit to Work-in-Process Inventory for $86,000.

Question

Quizplus · Accepted Answer

The total costs for the year are the beginning balance plus additional costs, totaling $68,000 + $450,000 = $518,000. With $86,000 still in production, the cost of goods manufactured is $518,000 - $86,000 = $432,000. This amount should be moved out of Work-in-Process Inventory, hence a credit to Work-in-Process Inventory for $432,000 is correct.

Harrington Industries, Which Uses a Process-Costing System, Had a Balance