Question

Dazzle Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for direct labor usage is:
Direct materials used $ 99,000
Direct labor used 172,000
Predetermined overhead rate (based on direct labor) 160%
Goods transferred to finished goods 444,000
Cost of goods sold 456,000
Credit sales 822,000

Multiple Choice
A. Debit Factory Wages Payable $172,000. credit Cash $172,000.
B. Debit Work in Process Inventory $172,000 credit Factory Wages Payable $172,000
C. Debit Cost of Goods Sold $172,000 credit Factory Wages Payable $172,000
D. Debit Work in Process Inventory $172,000 credit Raw Materials inventory $172,000.
E. Debit Work in Process Inventory $172,000; credit Cash $172,000.

Answer 1

Answer:

B) Debit work in process inventory $172,000

Credit Factory Wages Payable $172,000

Explanation:

Option A is not correct answer as the question is to record the production activities for direct labor usage instead of recording production and payment of wages. In option A, Wages payable is debited and cash is credited e.g. payment of wages is recorded and first step of recording production is missed.

Option B is the right answer as it appropriately records production activity for the month of June by debiting work in process inventory and crediting factory wages payable.

Option C is not correct answer as it is directly debiting cost of goods sold, which is debited at the time of sale of goods and goods are transferred from finished inventory to cost of goods sold.

Option D is not correct answer as it is directly crediting cash instead of recording payable. At the end of the month, production activities are recorded and payment entry is recorded at the time of payment depending on the Company policy to pay.