 This we're not having an expense. We're putting it into the factory overhead because it's depreciation on the factory So remember we already allocated out of the factory this 109. This is all the stuff that we allocated Here and so the 109 minus all the debits means that we're off our allocation was out of bounds by the 3000 that's okay. That's an estimate. We're gonna have to deal with that though at the end here All right, so now we transferred jobs from work and process to finish good So now we have work in process here the 260 we're gonna we're done with some of that stuff So we're gonna take it out of there and put it into the finished goods. So here's our job cost So we jump we transferred 14 and 15. So here's 14. Here's 15. We're gonna say it's not open anymore. It's now closed It's now closed. So if we take out the calculator here, we're going to say that the two jobs that we have are this 186 thousand plus the 314 Thousand those got allocated out five hundred thousand. Those are allocated out. What's left just the yellow account of 260 260 that's what's gonna be left in work in process This and this are gonna be allocated out to the 500. How do we do that with a journal entry? We're gonna debit the finished goods 500,000 putting it into 500 and we're gonna take it out of work in process If we look at the general ledger account, what's happening? It's going in the finished goods debit finished goods 500,000 that's where this number came from crediting work in process was at 760,000 minus the 500 credit brings it to 260. There's the 260 These need to be backed up by the job cost report as they are here All right, so we're still tied out there and next item now We're gonna sell so now we've got stuff and finished goods and we're gonna sell it Meaning it's gonna move to cost a good sold now the confusing thing when we sell something we sold job 14 And they give us a sales price when we think about job cost system The sales price can actually throw us off because we haven't been thinking about the sales price at all We've been thinking about the cost the whole way through this sales price has nothing to do with our job cost report We may have gotten to the sales price by using the job cost report But the book is usually gonna give us a sales price and we're gonna record the same journal entry We would if it was just a service company or at least the first half of it's gonna be the same meaning we're gonna debit In this case the cash 380 and we're gonna credit sales. So that's just we got 380,000 cash. We're gonna credit sales. Now, would we come up with a 380? The books gonna have to give it We did some kind of markup. We don't we didn't tell us that right? We came up with a sales price What we do know though is job 14 was sold here's job 14. It's no longer closed. It's shipped. It's gone It's out and it had a cost of the 186 so what's gonna happen this finished goods? We're gonna have to give it up Crediting the 186 and we're gonna have to put it into the cost of goods sold So we're gonna debit cost of goods sold the expense related to the asset that we sold and we're gonna credit the finished Goods taking it out of finished goods. So in terms of our asset accounts, the finished goods is gonna go from the 500 Down by the 186 to the 314. So here's the 314 there Here's the 314 here and of course and here's gonna be the 314 here represented by the job that has been closed But has not yet been shipped out. It's gonna be in the finished goods So if we recap this then we could see that the 260,000 260,000 will be in the job cost that represents the job that's still open the job that we're representing With the yellow item, it's gonna be still open still in the job cost That's backing up the work and process account now the job cost system is also gonna have jobs that have completed and have gone through The process so we have this job 15 that has closed but it has not yet been shipped That's gonna be the 314. That's what's gonna be in the finished goods here That's in the finished goods and that's in the finished goods on the trial balance And then of course we have the job that has been shipped out so this job has been completed been shipped out We've represented that by highlighting the shipped area. That's gonna be the 186,000 and that's gonna be what the cost of goods sold is representing at this point because it has been shipped out And therefore expensed. All right, so then we have the last piece. We got the adjust for underappreciated or overappreciated factory overhead So what are we talking about here? And we're looking at the factory overhead remember last time we had we left off with this 3000 credit in factory overhead. We applied out 109,000 to our jobs and then we put all of this stuff that's makes up the factory overhead And our estimate was off by the 3000 we need to make that go to zero because we want to Basically have a zero at the end of this time period so that we can make a new estimate next time period So we just need to make that zero so how do we make it zero? That's a credit Therefore we're gonna do the opposite thing to it and debit it making it go down Where are we gonna put the other side easiest thing to do put it into cost of goods sold Crediting cost of goods sold now you might be saying well, that's kind of funny because cost of goods sold is a debit balance And it's an expensive count. Why would we be crediting it? We don't normally credit cost of goods sold and the reason is because it's a small amount Hopefully it's immaterial we're doing this because the estimate was off It's going to be off because it's an estimate and we need to to take it down somewhere if it's immaterial then taking it to cost of goods sold is the easiest thing to do because Cost of goods sold is something that will then close out to retained earnings Unlike some of the permanent accounts all the permanent accounts which would not close out therefore once it closes out to retained earnings it'll be gone and That'll allow us to basically make a new estimate next time From scratch from fresh start so that's going to be the idea now if it was significant if it's a large amount Then we may have to do something else But if it's insignificant me it's not going to affect our decision making Then it would seem appropriate to just put it to cost get sold sold that being the easiest thing to do Also, just note that if if we happen to have gone the other way meaning that we ended up with a debit of like 3000 we would do the same thing we would make it go to zero We're going to do whatever we need to do to make it go to zero and in this case It would be that would be accredited to make it go to zero and then we would debit cost to get sold once again Doing whatever we need to do to make it go to zero as long as it's an immaterial amount No effect on the job cost system of this We still have the 260 tying out to the 260 because the factory overhead We're just dealing with the factory overhead and not the working process not to finish goods at that point