Multiple Choice
When a transaction is initially recorded in the journal and then subsequently posted to the general ledger, what is the primary purpose of this process?
137
views
2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Marco Company incurred the following costs for three jobs worked on in April: direct materials, direct labor, and manufacturing overhead. Which of the following journal entries correctly records the assignment of these costs to Work in Process (WIP)?
A
Debit Work in Process; Credit Raw Materials, Wages Payable, and Manufacturing Overhead
B
Debit Finished Goods; Credit Work in Process
C
Debit Manufacturing Overhead; Credit Work in Process
D
Debit Raw Materials, Wages Payable, and Manufacturing Overhead; Credit Work in Process
Verified step by step guidance1
Step 1: Understand the concept of Work in Process (WIP). WIP represents the costs of production that are partially completed. These costs include direct materials, direct labor, and manufacturing overhead incurred during the production process.
Step 2: Analyze the journal entry options provided. The correct journal entry should reflect the assignment of costs (direct materials, direct labor, and manufacturing overhead) to the Work in Process account, as these costs are incurred during production.
Step 3: Recall the accounting principle for assigning costs to WIP. When costs are incurred, the Work in Process account is debited to increase its balance, and the accounts representing the sources of these costs (e.g., Raw Materials, Wages Payable, and Manufacturing Overhead) are credited to decrease their balances.
Step 4: Match the correct journal entry to the principle. The correct journal entry should be: Debit Work in Process; Credit Raw Materials, Wages Payable, and Manufacturing Overhead. This entry reflects the movement of costs into the WIP account from their respective source accounts.
Step 5: Eliminate incorrect options. The other options provided do not correctly represent the assignment of costs to WIP. For example, 'Debit Finished Goods; Credit Work in Process' is used when transferring completed goods from WIP to Finished Goods, not for assigning costs to WIP.
Related Videos
Related Practice
