Question:
This is a continuation of the preceding example, where Twill Machinery is building a laying press for an antique book bindery. Twill pays its employees at the end of each month, and records the following payroll entry for its production department:
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Debit
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Credit
|
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Work-in-process (Job 1200)
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8,000
|
|
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Work-in-process (Job 1201)
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16,000
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2580
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Work-in-process (Job 1202)
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41,000
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Credit
|
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Overhead cost pool
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35,000
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|
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Wages payable
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100,000
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At the end of the month, Twill allocates the indirect labor in the overhead cost pool to the various open jobs. Of the $35,000 of labor in the overhead cost pool, Twill allocates $4,000 to Job 1200 with the following entry:
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Debit
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Credit
|
|
Work-in-process (Job 1200)
|
4000
|
|
|
Overhead cost pool
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|
4000
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Twill completes work on the laying press and shifts all related labor costs to the finished goods inventory account. The entry is:
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Debit
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Credit
|
|
Finished goods (Job 1200)
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12000
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|
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Work-in-process (Job 1200)
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|
12000
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This final entry comes from the $8,000 of direct labor that was initially charged against Job 1200, and the $4,000 of indirect labor that was allocated to it.