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17-2TI

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 916

Short Answer

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.

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

See the step by step solution

Step by Step Solution

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.

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