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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 781
Experience:  CPA experienced in tax and financial planning
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Explain in detail how costs move from inventory account to

Customer Question

Explain in detail how costs move from inventory account to another AND provide an example of the journal entries used.
Submitted: 5 years ago.
Category: Finance
Expert:  DanielleCPA replied 5 years ago.

DMC :

Journal entries first:

DMC :

To move materials costs from Materials Inventory to WIP:
Dr. Work in Process Inventory
Cr. Materials Inventory

DMC :

To move costs from WIP to Finished Goods:
Dr. Finished Goods Inventory
Cr. Work in Process Inventory

DMC :

When materials are transferred to the assembly floor, the cost of these direct materials is transferred to from Materials Inventory to Work in Process Inventory.

DMC :

Direct Labor and Factory Overhead costs are applied to the Work in Process inventory account as incurred.

DMC :

As the manufacturing process is completed, the costs in work in process inventory account are transferred into the finished goods inventory account.

DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 781
Experience: CPA experienced in tax and financial planning
DanielleCPA and 2 other Finance Specialists are ready to help you
Customer: replied 5 years ago.

I don't understand your question