Question: Give the journal entry for raw materials purchased on account. Explain how this transaction affects the accounting equation.
Raw material inventory
This transaction increases the raw material inventory (Assets) and increases the liabilitiy (accounts payable) of the company
Raw material means the material used by the company to manufacture the finished goods. It is shown as the current assets in the balance sheet of the company. The purchase of raw material increases its balance in the company’s balance sheet.
Accounts payable means the amount due to vendors for the goods or services received that have not yet been paid for. It is treated as the current liability in the balance sheet of the company. The purchase of raw material on account increases the balance of accounts payable on the liabilities’ side of the company’s balance sheet.
Question: Wesson Company is a consulting firm. The firm expects to have $45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is $75 per hour.
16. Calculate the predetermined overhead allocation rate for Wesson using estimated billable hours for the allocation base.
17. Wesson completed a consulting job for George Peterson and billed the customer for 15 hours. What was the total cost of the consulting job?
18. If Wesson wants to earn a profit equal to 60% of the cost of a job, how much should the company charge Mr. Peterson?
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