Hamilton, 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, Hamilton 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

Since there is still $86,000 worth of goods in production at year-end, the Work-in-Process Inventory account needs to be adjusted to reflect this. Therefore, the journal entry on December 31 should include a credit to the Work-in-Process Inventory account for $86,000. This entry will ensure that the balance in the WIP account accurately represents the cost of goods still being produced at year-end.

Hamilton, Which Uses a Process-Costing System, Had a Balance in Its