Chapter 8, problem 50

Prepare a Production Cost Report and Adjust Inventory Balances: Weighted-Average Method The records of Fremont Corporation's initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs Work-in-process inventory ............ Finished goods inventory ............. Units 120,000 20,000 Unaudited Costs $793,152 337,560 As the auditor, you have learned the following information Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available Units Cost Direct Materials 80,000 400,000 $ 240,000 Beginning inventory (80% complete as to labor) ......... Units started Current costs ..... Units completed and transferred to finished goods inventory .......... 1,560,000 360,000 Required a Prepare a production cost report for Fremont using the weighted average method. (Hint You will need to calculate equivalent units for three categories, materials, labor and overhead.) Show the journal entry required to correct the difference between the unaudited records and actual ending balances of Work in Process Inventory and Finished Goods inventory Debitor credit Cost of Goods Sold for any difference If the adjustment in requirement is not made will the company income and inventories be overstated or understated