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Exercise 20-1 The gross earnings of the factory workers for Larkin Company durin

ID: 2480872 • Letter: E

Question

Exercise 20-1

The gross earnings of the factory workers for Larkin Company during the month of January are $76,000. 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.


(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

(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.

Explanation / Answer

SOLUTION :

No.

Account Titles and Explanation

Debit

Credit

(a)

FACTORY WAGE EXPESNE

90000

    FACTORY WAGE PAYABLE

76000

    PAYROLL TAX PAYABLE

8000

    FRINGE BENEFIT TAX PAYABLE

6000

(b)

WORK IN PROGRESS INVENTORY (90000 X85%)

76500

MAUFACTURING OVERHEAD (90000X15%)

13500

       FACTORY WAGE EXPENSE

90000

No.

Account Titles and Explanation

Debit

Credit

(a)

FACTORY WAGE EXPESNE

90000

    FACTORY WAGE PAYABLE

76000

    PAYROLL TAX PAYABLE

8000

    FRINGE BENEFIT TAX PAYABLE

6000

(b)

WORK IN PROGRESS INVENTORY (90000 X85%)

76500

MAUFACTURING OVERHEAD (90000X15%)

13500

       FACTORY WAGE EXPENSE

90000