Multiple Choice
Which of the following steps must be completed in QuickBooks Online (QBO) to display account numbers in the Chart of Accounts?
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2. Transaction Analysis
Journal Entries: Business Formation Example
Multiple Choice
Which of the following is the correct journal entry to record the allocation of factory overhead to Work in Process?
A
Debit Work in Process; Credit Raw Materials
B
Debit Factory Overhead; Credit Work in Process
C
Debit Factory Overhead; Credit Raw Materials
D
Debit Work in Process; Credit Factory Overhead
Verified step by step guidance1
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.
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