Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

The journal entry to record the use of direct labor in process costing is to:

Debit Manufacturing Overhead; Credit Wages Payable

Debit Wages Expense; Credit Work in Process Inventory

Debit Work in Process Inventory; Credit Wages Payable

Debit Finished Goods Inventory; Credit Wages Payable

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Verified step by step guidance

Understand the context: In process costing, direct labor costs are incurred as part of the production process and are directly traceable to the Work in Process Inventory account. This reflects the costs associated with labor used in manufacturing goods that are still in production.

Identify the accounts involved: The correct journal entry involves debiting the Work in Process Inventory account to increase it (representing the addition of direct labor costs to production) and crediting the Wages Payable account to recognize the liability for wages owed to employees.

Recall the accounting principle: Direct labor costs are considered part of the product cost and are capitalized in the Work in Process Inventory account until the goods are completed and moved to Finished Goods Inventory. This aligns with the matching principle in accounting.

Construct the journal entry: The journal entry should be formatted as follows: Debit Work in Process Inventory (to increase the asset account for production costs) and Credit Wages Payable (to record the liability for wages owed).

Verify the entry: Ensure that the debit to Work in Process Inventory reflects the direct labor costs accurately and the credit to Wages Payable corresponds to the amount owed to employees for their labor.