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

(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)