Problem 4

Prepare journal entries to reflect the following transactions for a textile company.After you complete the entries, determine the amount to include in raw materials, work in process, and finished goods.

May 7, 20X7	Purchased fabric to be used in the manufacturing process. The purchase price was $7,000, on account.
May 11, 20X7	Transferred 70% of the raw materials purchases on May 7 into production.
May 11, 20X7	Incurred direct labor cost of $4,200.Factory overhead is applied at 30% of the direct labor cost.
May 12, 20X7	Transferred completed product with total assigned costs of $5,700 to finished goods.
May 13, 20X7	Sold and delivered half of the finished goods (from May 12) to a customer for $9,000 cash.

WORKSHEET #4

GENERAL JOURNAL
Date	Accounts	Debit	Credit
5-7-X7
	To record purchase of raw materials.
5-11-X7
	To transfer raw materials to production, record direct labor cost on job, and apply overhead at the predetermined rate.
5-12-X7
	To transfer completed units to finished goods inventory.
5-13 X7
	To record sale of finished product for $9,000.
5-13-X7
	To transfer finished goods to cost of goods sold.