Multiple Choice
Which of the following correctly matches the activity to its effect on the general ledger accounts?A company purchases office supplies for cash.
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
The journal entry to record indirect labor costs used in production includes a debit to which of the following accounts?
A
Direct Labor Expense
B
Work in Process Inventory
C
Wages Payable
D
Factory Overhead
Verified step by step guidance1
Understand the concept of indirect labor costs: Indirect labor refers to wages paid to employees who are not directly involved in the production of goods but support the production process, such as maintenance workers or supervisors.
Recognize the role of Factory Overhead: Indirect labor costs are part of factory overhead, which includes all indirect costs incurred during production. Factory overhead is applied to production but is not directly traceable to specific jobs or products.
Determine the correct account to debit: When recording indirect labor costs, the Factory Overhead account is debited because these costs are part of the overhead expenses that need to be allocated to production.
Identify the account to credit: The credit entry typically goes to Wages Payable, as this represents the liability for wages owed to employees for their work.
Prepare the journal entry: The journal entry to record indirect labor costs would be formatted as follows: Debit Factory Overhead and Credit Wages Payable. This reflects the increase in overhead costs and the liability for wages.
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