Question

"During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. In addition, factory overhead charged to production was $32,000. The entry to record the direct labor costs is"

Answer 1

Answer:

These are the options for the question:

a.Wages Payable                   175,000

    Work in Process                                       175,000

b.Work in Process                  175,000

     Wages Payable                                       175,000

c.Work in Process                  150,000

     Wages Payable                                       150,000  

d.Wages Payable                    150,000

     Work in Process                                     150,000

And this is the correct answer:

c.Work in Process                  150,000

     Wages Payable                                       150,000  

Explanation:

Work in Process in an asset account that values the amount of direct labor performed in the completion of a product. In the question, it is specified that while total labor costs amounted to $175,000, only $150,000 of those costs where used to make the production orders, while $25,000 was used in general factory work (not direct labor).

The counter-account is wages payable, a liability account because it represents labor costs that have yet to be paid (principle of accrual accounting).