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: Business Formation Example

Financial Accounting

2. Transaction Analysis

Journal Entries: Business Formation Example

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Multiple Choice

Which of the following is the correct journal entry to record the allocation of factory overhead to Work in Process?

Debit Work in Process; Credit Raw Materials

Debit Factory Overhead; Credit Work in Process

Debit Factory Overhead; Credit Raw Materials

Debit Work in Process; Credit Factory Overhead

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Verified step by step guidance

Understand the concept of factory overhead allocation: Factory overhead refers to indirect costs incurred during production, such as utilities, depreciation, and maintenance. These costs need to be allocated to Work in Process (WIP) to reflect the production costs accurately.

Recognize the accounts involved: Work in Process is an asset account that tracks the costs of partially completed goods. Factory Overhead is a temporary account used to accumulate indirect production costs before allocation.

Determine the correct journal entry: Allocating factory overhead to Work in Process involves transferring the accumulated overhead costs from the Factory Overhead account to the Work in Process account.

Apply the double-entry accounting principle: To record the allocation, debit the Work in Process account to increase its balance (reflecting the addition of overhead costs) and credit the Factory Overhead account to decrease its balance (indicating the allocation of costs).

Write the journal entry: The correct journal entry is 'Debit Work in Process; Credit Factory Overhead,' as this reflects the allocation of overhead costs to production.