In 2011 Bradshaw Inc. incurred $40,000 of manufacturing overhead costs which will be paid for in 2012. Which of the following would be the correct journal entry to record this transaction?

Question

Quizplus · Accepted Answer

The manufacturing overhead costs would be incurred in the production process, therefore the entry should be recorded as an increase to Work in Process Inventory (which includes all costs incurred during manufacturing). The corresponding liability account would be Accounts Payable. The entry would be:
Work in Process Inventory 40,000
Accounts Payable 40,000