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: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

When direct labor costs are recorded, which of the following journal entries is correct?

Debit Wages Payable; Credit Work in Process Inventory

Debit Manufacturing Overhead; Credit Cash

Debit Work in Process Inventory; Credit Wages Payable

Debit Finished Goods Inventory; Credit Wages Expense

Previous problemNext problem

Verified step by step guidance

Understand the context: Direct labor costs are incurred during the production process and are directly traceable to specific jobs or products. These costs are recorded in the Work in Process Inventory account, as they contribute to the production of goods.

Identify the correct accounts: Direct labor costs increase the Work in Process Inventory account (an asset account) because they are part of the production costs. At the same time, they create a liability in the form of Wages Payable, which represents the amount owed to employees.

Determine the journal entry format: A journal entry must have a debit and a credit. In this case, debit the Work in Process Inventory account to increase it, and credit the Wages Payable account to record the liability.

Review the incorrect options: The other options provided involve accounts like Manufacturing Overhead, Finished Goods Inventory, and Wages Expense, which are not directly related to recording direct labor costs. Direct labor is not part of Manufacturing Overhead, Finished Goods Inventory is used after production is complete, and Wages Expense is typically used in non-manufacturing contexts.

Conclude the correct journal entry: The correct journal entry for recording direct labor costs is 'Debit Work in Process Inventory; Credit Wages Payable,' as this reflects the increase in production costs and the liability for wages owed.