E2-1 Prepare entries for factory labor The gross earnings of the factory workers
ID: 2561251 • Letter: E
Question
E2-1 Prepare entries for factory labor 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. Instructions (a) Prepare the entry to record the factory labor costs for the month of January (b) Prepare the entry to assign the factory labor to production. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . After you have completed E2-1, consider the following additional question. 1. Assume that factory wages changed and employer's payroll taxes changed to $78,000 and $9,360 respectively. Also assume that 80% of total labor costs is related to direct labor. Revise the journal entries to reflect these changes. E2-1 Prepare entries for factory labor 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. Instructions (a) Prepare the entry to record the factory labor costs for the month of January (b) Prepare the entry to assign the factory labor to production. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .Explanation / Answer
E2-1
(a) Salaries & Wages a/c- 90,000
To Salaries & Wages payable 76,000
To Payroll taxes payable(Employer portion) 8,000
To Fringe benefits tax payable (Employer portion) 6,000
(Being labor costs for the period are booked)
(b) Assigning direct labor cost to work in progress a/c
Work-In-Progress a/c 76,500
To Salaries & Wages a/c 76,500
(Being Direct labor cost (85% of 90,000 i.e total labor cost for the period) of 76,500 assigned to Work in progress a/c)
Assigning indirect labor cost to factory overhead
Factory overhead a/c 13,500
To Salaries & Wages 13,500
(Being Indirect labor cost (15% of 90,000 i.e total labor cost for the period) of 13,500 assigned to factory overhead a/c)
Additional situation
1. Booking expense
Salaries & Wages a/c- 93,360
To Salaries & Wages payable 78,000
To Payroll taxes payable(Employer portion) 9,360
To Fringe benefits tax payable (Employer portion) 6,000
(Being labor costs for the period are booked)
2.Assignment of salary costs to direct & indirect labor cost
(b) Assigning direct labor cost to work in progress a/c
Work-In-Progress a/c 74,688
To Salaries & Wages a/c 74,688
(Being Direct labor cost (80% of 93,360 i.e total labor cost for the period) of 74,688 assigned to Work in progress a/c)
Assigning indirect labor cost to factory overhead
Factory overhead a/c 18,672
To Salaries & Wages 18,672
(Being Indirect labor cost (15% of 93,360 i.e total labor cost for the period) of 18,672 assigned to factory overhead a/c)
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