Question

Ruby Company is a job-order firm that follows a normal costing approach. During the month of January, Ruby worked on two jobs: Job 52 and Job 56. For Job 52, the total direct labor cost is $450 and for Job 56, the total direct labor cost is $250. Identify the journal entry to be made to record the direct labor costs assigned to the two jobs.

a. Debit Wages Payable by $700, and credit Finished Goods by $700.
b. Credit Wages Payable by $700, and debit Finished Goods by $700.
c. Debit Work-in-Process Inventory by $700, and credit Wages Payable by $700.
d. Credit Work-in-Process Inventory by $700, and debit Wages Payable by $700.

Answer 1

The journal entry to record the direct labor costs for Ruby Company's two jobs totals $700, and would be to debit Work-in-Process Inventory and credit Wages Payable by the same amount.

Step-by-step explanation:

The question relates to accounting and specifically the journal entries for recording direct labor costs in job-order costing using a normal costing approach. When a company incurs labor costs, these costs should be assigned to the jobs to which the labor contributed, until those jobs are completed. Ruby Company has incurred a total of $700 in direct labor costs for two jobs.

Therefore, the correct journal entry to record these direct labor costs would be to debit Work-in-Process Inventory by $700, reflecting the labor costs that are now part of the work-in-process, and to credit Wages Payable by $700, which represents the obligation to pay the employees for their labor. This entry affects the balance sheet accounts and not the income statement until the goods are sold.

The answer to the question is:
Option c. Debit Work-in-Process Inventory by $700, and credit Wages Payable by $700.