Question

If Department L uses $53,000 of direct labor and Department M uses $21,000 of direct labor, the following journal entry would be recorded using a process costing system: Work in Process Inventory, Department L 53,000 Work in Process Inventory, Department M 21,000 Factory Payroll Payable 74,000
a. True.
b. False.

Answer 1

Answer:

True

Explanation:

The entry would record the cost incurred on the raw material to convert it into finished goods. The entry would be the increase in the Work in progress in the relevant department and increase in the payroll payable (liability increase).

So the increase in value of inventory is debited and increase in liability is credited:

Dr Work in Process Inventory, Department L 53,000

Dr Work in Process Inventory, Department M 21,000

Cr                                        Factory Payroll Payable 74,000