Embark produces mulch for landscaping use. The following information summarizes production operations for June. The journal entry to record June production activities for direct labor usage is:
A) Debit Factory Payroll $160,000; credit Cash $160,000.
B) Debit Goods in Process Inventory $160,000; credit Factory Payroll $160,000.
C) Debit Cost of Goods Sold $160,000; credit Factory Payroll $160,000.
D) Debit Goods in Process Inventory $160,000; credit Raw Materials Inventory $160,000.
E) Debit Goods in Process Inventory $160,000; credit Cash $160,000.

Question

Quizplus · Accepted Answer

Direct labor is included in the cost of goods produced, which is reflected in the Goods in Process Inventory account. Therefore, the journal entry to record the cost of direct labor usage for June would be to debit Goods in Process Inventory for $160,000, which represents the cost of direct labor added to the cost of materials and other manufacturing overhead during the production process. The credit would be to Factory Payroll, as this is where the cost of direct labor is initially recorded when it is paid to manufacturing employees.

Embark Produces Mulch for Landscaping Use