Chapter 2

Question 1

What are the two types of Basic Accounting Systems?

Answer 1

Job Order Costing
-for specific jobs

Process Costing
-mass production

Question 2

Actual Costing v.s. Normal Costing

Answer 2

Actual Costing
-assign DM, DL, and OH to each unit

Normal Costing (more realistic)

• assign DM and DL to each unit
• allocate OH to each unit

Question 3

When you apply OH based on the predetermined rate, what is the Journal Entry?

Answer 3

Debit to WIP

Credit to Manufacturing OH

Question 4

What does a Debit balance in the Manufacturing OH account mean? What does a Credit Balance mean?

Answer 4

Debit Balance
-OH under-applied

Credit Balance
-OH over-applied

Question 5

When should you Debit WIP inventory?

Answer 5

DM used
DL recorded
OH is applied (you credit OH account)

Question 6

When should you Debit FG Inventory

Answer 6

When inventory is completed:

Debit FG
Credit WIP

Question 7

When should you debit COGS

Answer 7

When inventory is sold:

Debit COGS
Credit FG

Debit Cash/AIP
Credit Revenue