Test Company uses a normal, process costing system to determine product cost. The company uses the first-in, first-out (FIFO) method to account for equivalent units and costs in beginning work-in-process.

The product passes through two departments: Department 1 and Department 2. In Department 2, all direct materials are added at the beginning of the process. The following information is available for Department 2 in July.

Work-in-process, July 1
Units	5,000 units
Costs
Direct materials	$25,000
Conversion cost	16,000
Transferred-in cost	20,000
July activity
Units
Transferred in	50,000 units
Completed and transferred out	45,000 units
Costs added
Direct materials	$400,000
Conversion cost	184,000
Transferred-in-cost	200,000
Percentage of completion
Work-in-process, July 1	60%
Work-in-process, July 31	40%

The journal entry to record the direct materials cost added in July would include

		A debit to work-in-process inventory (Department 2) for $425,000
		No entry would be required
		A debit to raw materials inventory for $400,000
		A debit to work-in-process inventory (Department 2) for $400,000

The journal entry to record the transferred-in cost added in July would include

		A debit to work-in-process inventory (Department 1) for $200,000
		No entry would be required
		A debit to work-in-process inventory (Department 2) for $220,000
		A debit to work-in-process inventory (Department 2) for $200,000