17-2TI - Horngren'S Financial And Managerial Accounting

Question

Question: Record the following journal entries for Smith Company:

6. Purchased raw materials on account, \(10,000.

7. Used \)6,000 in direct materials and \(500 in indirect materials in production.

8. Incurred \)8,000 in labor costs, of which 80% was direct labor.

Step-by-Step Solution

Answer

Answer

Date	Particulars	Debit ($)	Credit ($)
6.	Raw material inventory	10,000
	Account payable		10,000
7.	Work-in-progress inventory (direct material)	6,000
	Manufacturing overheads (indirect material)	500
	Raw material inventory		6,500
8.	Work-in-rocess inventory (direct labor)  (8,000 x 80%)	6,400
	Manufacturing overheads (indirect labor)	1,600
	Wages payable		8,000

Step 1: Raw material

Raw material means the input used by an organization to produce or manufacture the products. It is also called as the inventory. It is classified as the direct material and the indirect material.

Step 2: Labor cost

Labor cost is defined as the total expenditure incurred by the employers for the employment of the employes. It is classified as the direct labot cot and the indirect labor cost.