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

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

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Multiple Choice

When actual manufacturing overhead costs are incurred, which of the following journal entries is most appropriate to record the transaction?

Debit Various Accounts (such as Cash, Accounts Payable, etc.); Credit Manufacturing Overhead

Debit Manufacturing Overhead; Credit Various Accounts (such as Cash, Accounts Payable, etc.)

Debit Work in Process Inventory; Credit Manufacturing Overhead

Debit Manufacturing Overhead; Credit Work in Process Inventory

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Verified step by step guidance

Step 1: Understand the concept of manufacturing overhead. Manufacturing overhead includes all indirect costs associated with production, such as factory utilities, depreciation on equipment, and indirect labor. These costs are accumulated in the Manufacturing Overhead account during the production process.

Step 2: Recognize the purpose of the journal entry. When actual manufacturing overhead costs are incurred, they need to be recorded in the accounting system to reflect the expenses accurately. The Manufacturing Overhead account is debited to accumulate these costs.

Step 3: Identify the accounts involved. The accounts to be credited will depend on the nature of the incurred costs. For example, if the cost is paid in cash, the Cash account is credited. If the cost is on credit, the Accounts Payable account is credited. Other accounts, such as Prepaid Expenses, may also be credited depending on the transaction.

Step 4: Construct the journal entry. The journal entry to record actual manufacturing overhead costs incurred would be: Debit Manufacturing Overhead (to accumulate the costs) and Credit Various Accounts (such as Cash, Accounts Payable, etc., depending on the nature of the expense).

Step 5: Note the distinction between recording incurred costs and applying overhead. The journal entry provided in the problem is specifically for recording incurred costs. Applying overhead to Work in Process Inventory is a separate process that occurs later, based on a predetermined overhead rate.