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The records of Fremont Corporation’s initial and unauditedaccounts show the following ending inventory balances, which mustbe adjusted to actual costs:UnitsUnaudited CostsWork-in-process inventory120,000$793,152Finished goods inventory20,000337,560As the auditor, you have learned the following information.Ending work-in-process inventory is 40 percent complete withrespect to conversion costs. Materials are added at the beginningof the manufacturing process, and overhead is applied at the rateof 80 percent of the direct labor costs. There was no finishedgoods inventory at the start of the period. The followingadditional information is also available:CostsUnitsDirect MaterialsDirect LaborBeginning inventory (80% complete as to labor)80,000$ 240,000$ 546,000Units started400,000Current costs1,560,0002,208,000Units completed and transferred to finished goodsinventory360,000RequiredPrepare a production cost report for Fremont using theweighted-average method. (Hint: You will need to calculateequivalent units for three categories: materials, labor, andoverhead.)Show the journal entry required to correct the differencebetween the unaudited records and actual ending balances ofWork-in-Process Inventory and Finished Goods Inventory. Debit orcredit Cost of Goods Sold for any difference.If the adjustment in requirement (b) is not made, willthe company’s income and inventories be overstated orunderstated?(CPA adapted)