PROCESS COSTING SYSTEM

Production of an article in two consecutive processes. There is final inventory, but no initial work in process.

The industrial company Los Herrera, S.A., at the beginning of the fiscal year of May 1, 2020, has the following balances:

REQUIRED: Prepare the financial statements corresponding to each process with its report.

Bank	$2,000,000.00
Raw material warehouse	$ 1,500,000.00
Warehouse of finished articles	$ 900,000.00
Accounts payable	$ 500,000.00
Share capital	$3,900,000.00

During the month of May 2020, the following consumptions are recorded in the process of manufacture the article XM.

Process 1: Process plant #1. The costs incurred in the month of May 2020 were:

Concept	Import
Raw material	$ 1,000,000.00
Labor	$500,000.00
Indirect charges	$10,000.00
Total costs incurred	$1,510,000.00

The production completed during the month of May 2020 and transferred to process 2 was 43,000 liters. The final inventory of the process was 3,000 liters with the following percentages of progress:

Progress	Percentage of progress
Raw material	100%
Labor	80%
Indirect charges	70%

Process 2: Process plant no. 2 Costs incurred in the month of May 2020 were from:

Concept	Import
Raw material (43,000 liters received from process 1)
Labor	$ 600,759.00
Indirect charges	$90,000.00
Total cost of conversion	$ 690,759.00

The production completed during the month of May 2020, sent to the item warehouse finished, was 40,000 liters. The final inventory of the process was 3,000 liters, with the following percentages of progress:

Progress	Percentage of Progress
Raw material	100%
Labor	80%
Indirect charges	70%