Question

The gross earnings of the factory workers for Vargas Company during the month of January are $66,000. The employer’s payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer on this payroll are $6,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.(a) Prepare the entry to record the factory labor costs for the month of January.(b) Prepare the entry to assign factory labor to production.

Answer 1

Answer:

(a) Debited all the loses and expenses and credited all the increased liability.

Factory Labor a/c        Dr.                      $80,000

 To Factory wages payable                                     $66,000

 To Employer payroll tax payable                            $8,000

 To Employer fringe benefits payable                     $6,000

(recording of factory labor costs)

(b) All increased assets and expenses and losses are debited and credited the increased liability.

Work in process Inventory a/c (85% of $80,000) Dr. $68,000

Manufacturing account a/c (15% of $80,000)       Dr. $12,000

To Factory Labor                                                                $80,000  

(recording of factory labor to production)