Minstrel Manufacturing uses a job order costing system.During one month,Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect.Minstrel incurred a factory payroll of $150,000,of which $40,000 was indirect labor.Minstrel uses a predetermined overhead rate of 150% of direct labor cost.
-The journal entry to record the payment of the factory payroll is:
A)Debit Work in Process Inventory $150,000; credit Factory Wages Payable $150,000.
B)Debit Work in Process Inventory $150,000; credit Cash $150,000.
C)Debit Factory Wages Payable $150,000; credit Cash $150,000.
D)Debit Factory Overhead $40,000; credit Factory Wages Payable $40,000.
E)Debit Work in Process Inventory $110,000; credit Cash $150,000.

Question

Quizplus · Accepted Answer

The journal entry to record the payment of factory payroll is to debit the Factory Wages Payable account and credit Cash. This is because the company incurred a liability to pay its employees for their services, and cash is used to settle that liability. The Work in Process Inventory account is not involved in this transaction because it is used to track the cost of goods being produced, and the factory payroll expense is not yet assigned to specific jobs. Additionally, the Factory Overhead account is not used in this transaction because it tracks indirect costs, such as depreciation and utilities, and is not affected by the payment of wages to employees.

Minstrel Manufacturing Uses a Job Order Costing System