Question

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 factory labor to production.

Answer 1

(a) The entry to record the factory labor costs for the month of January will be prepared as follows:

Account Titles and Explanation	Debit	Credit
Factory Labor (76,000 + 8,000 + 6,000)	90000
Factory Wages Payable		76000
Employer Payroll Taxes Payable		8000
Employer Fringe Benefits Payable		6000

(b) The entry to assign factory labor to production will be prepared as follows:

Account Titles and Explanation	Debit	Credit
Work in Process Inventory (90,000 x 85%)	76500
Manufacturing Overhead (90,000 x 15%)	13500
Factory Labor		90000