Prepare General Journal Entries For The Following Transactio

Prepare General Journal Entries For The Following Transactions Of A

Prepare General Journal Entries For The Following Transactions Of A

Prepare general journal entries for the following transactions of a manufacturing company for the month of January 2016. a. In January, 400 hours of direct labor were worked at $42.00 per hour. b. In January, $600,000 of raw materials were requisitioned (used) for production. c. In January, the total cost of all jobs completed was $1,500,000.

Paper For Above instruction

The manufacturing industry heavily relies on accurate and timely accounting entries to record financial activities related to production, labor, raw materials, and completed jobs. Proper journal entries are essential for maintaining transparency, ensuring compliance with accounting standards, and providing valuable data for management decision-making. The following paper presents comprehensive journal entries for typical transactions encountered by a manufacturing company in January 2016, along with explanations for the components involved.

Journal Entries for January 2016 Transactions

a. Recording Direct Labor Costs

On the first transaction, the company incurred 400 hours of direct labor at a rate of $42.00 per hour. The journal entry to record this activity includes debiting Work in Process (WIP) Inventory and crediting Wages Payable or Cash, depending on whether the wages are paid immediately or accrued.

Dr. Work in Process Inventory   $16,800


Cr. Wages Payable (or Cash)          $16,800


(To record direct labor cost for 400 hours at $42/hour)

Calculation: 400 hours × $42 = $16,800

b. Requisition of Raw Materials for Production

The company requisitioned $600,000 worth of raw materials during January. This transaction involves transferring raw materials from Raw Materials Inventory to Work in Process Inventory, reflecting usage for manufacturing.

Dr. Work in Process Inventory   $600,000


Cr. Raw Materials Inventory         $600,000


(To record raw materials requisitioned for production)

c. Recording Cost of Jobs Completed

The total cost of all jobs completed in January was $1,500,000. These costs are transferred from Work in Process Inventory to Finished Goods Inventory, indicating shipment or completion.

Dr. Finished Goods Inventory   $1,500,000


Cr. Work in Process Inventory       $1,500,000


(To record costs of completed jobs transferred to finished goods)

Explanation and Significance

The journal entries above depict fundamental manufacturing transactions and illustrate the flow of costs within a manufacturing setting. Recording direct labor ensures labor costs are appropriately allocated, essential for accurate cost analysis and pricing strategies. Raw materials requisition entries reflect resource consumption, which impacts raw material inventories and production costs. Finally, transferring the cost of completed jobs to Finished Goods aligns with inventory accounting, providing data necessary for calculating gross profit and assessing manufacturing efficiency.

Conclusion

Accurate journal entries are vital in manufacturing accounting, enabling managers and external auditors to track resource utilization and cost flow efficiently. This systematic approach supports effective decision-making, cost control, and financial reporting. The provided journal entries for January 2016 serve as foundational entries that facilitate a comprehensive understanding of manufacturing operations’ financial implications.

References

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