Determine the total cost transferred out for July.

Determine the total cost of work-in-process inventory as of July 31.

The journal entry to record the direct materials cost added in July would include

		A debit to work-in-process inventory (Department 2) for $425,000
		A debit to work-in-process inventory (Department 2) for $400,000
		No entry would be required
		A debit to raw materials inventory for $400,000

The journal entry to record the transferred-in cost added in July would include

		A debit to work-in-process inventory (Department 2) for $220,000
		No entry would be required
		A debit to work-in-process inventory (Department 1) for $200,000
		A debit to work-in-process inventory (Department 2) for $200,000

Test Company uses a normal, process costing system to determine product cost. The company uses the first-in, first-out (FIFO) method to account for equivalent units and costs in beginning work-in-process. The product passes through two departments: Department 1 and Department 2 . In Department 2 , all direct materials are added at the beginning of the process. The following information is available for Department 2 in July