Which of the following is the correct journal entry to record the transfer of jobs 306 and 307 from Work in Process to Finished Goods Inventory?

• A. Debit Work in Process Inventory; Credit Finished Goods Inventory
• B. Debit Cost of Goods Sold; Credit Finished Goods Inventory
• C. Debit Work in Process Inventory; Credit Cost of Goods Sold
• D. Debit Finished Goods Inventory; Credit Work in Process Inventory

Answer: (D)

Verified step by step guidance

1. Understand the context: The transfer of jobs from Work in Process (WIP) to Finished Goods Inventory represents the completion of production. This means the costs accumulated in WIP for these jobs are now moved to Finished Goods Inventory, which is an asset account.
2. Identify the accounts involved: Work in Process Inventory is reduced because the jobs are no longer in production. Finished Goods Inventory is increased because the completed jobs are now part of the company's inventory ready for sale.
3. Determine the type of accounts: Work in Process Inventory and Finished Goods Inventory are both asset accounts. To decrease Work in Process Inventory, you need to credit it. To increase Finished Goods Inventory, you need to debit it.
4. Formulate the journal entry: The correct journal entry to record this transfer is to debit Finished Goods Inventory and credit Work in Process Inventory. This reflects the movement of costs from one asset account to another.
5. Review the logic: Ensure the journal entry aligns with the accounting principle of matching costs to the appropriate stage of production. The transfer from WIP to Finished Goods Inventory is a standard procedure in job order costing systems.