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Recording manufacturing costs Todd Lay just began working as a cost accountant for Enteron Industries Inc., which manufactures gift items. Todd is preparing to record summary journal entries the month. Todd begins by recording the factory wages as follows: Wages Expense 60,000 Wages Payable 60,000 Then the factory depreciation: Depreciation Expense—Factory Machinery 20,000 Accumulated Depreciation—Factory Machinery 20,000 Todd’s supervisor, Jeff Fastow, walks by and notices the entries. The following conversation takes place: Jeff: That’s a very unusual way to record our factory wages and depreciation for the month. Todd: What do you mean? This is the way I was taught in school to record wages and depreciation. You know, debit an expense and credit Cash or payables or, in the case of depreciation, credit Accumulated Depreciation. Jeff: Well, it’s not the credits I’m concerned about. It’s the debits—I don’t think you’ve recorded the debits correctly. I wouldn’t mind if you were recording the administrative wages or office equipment depreciation this way, but I’ve got real questions about recording factory wages and factory machinery depreciation this way. Todd: Now I’m really confused. You mean this is correct for administrative costs but not for factory costs? Well, what am I supposed to do—and why? 1. Play the role of Jeff and answer Todd’s questions. 2. Why would Jeff accept the journal entries if they were for administrative costs?

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 19, Problem 19.5CP
Textbook Problem

Recording manufacturing costs

Todd Lay just began working as a cost accountant for Enteron Industries Inc., which manufactures gift items. Todd is preparing to record summary journal entries the month. Todd begins by recording the factory wages as follows:

Wages Expense 60,000  
Wages Payable   60,000
Then the factory depreciation:    
Depreciation Expense—Factory Machinery 20,000  
Accumulated Depreciation—Factory Machinery   20,000

Todd’s supervisor, Jeff Fastow, walks by and notices the entries. The following conversation takes place:

Jeff: That’s a very unusual way to record our factory wages and depreciation for the month.

Todd: What do you mean? This is the way I was taught in school to record wages and depreciation. You know, debit an expense and credit Cash or payables or, in the case of depreciation, credit Accumulated Depreciation.

Jeff: Well, it’s not the credits I’m concerned about. It’s the debits—I don’t think you’ve recorded the debits correctly.

I wouldn’t mind if you were recording the administrative wages or office equipment depreciation this way, but I’ve got real questions about recording factory wages and factory machinery depreciation this way.

Todd: Now I’m really confused. You mean this is correct for administrative costs but not for factory costs? Well, what am I supposed to do—and why?

  1. 1. Play the role of Jeff and answer Todd’s questions.
  2. 2. Why would Jeff accept the journal entries if they were for administrative costs?

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Chapter 19 Solutions

Accounting
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Ch. 19 - Issuance of materials On May 7, Bergan Company...Ch. 19 - Issuance of materials On August 4, Rothchild...Ch. 19 - Direct labor costs During May, Bergan Company...Ch. 19 - Direct labor costs During August, Rothchild...Ch. 19 - Factory overhead costs During May, Bergan Company...Ch. 19 - Factory overhead costs During August, Rothchild...Ch. 19 - Applying factory overhead Bergan Company estimates...Ch. 19 - Applying factory overhead Rothchild Company...Ch. 19 - Job costs At the end of May, Bergan Company had...Ch. 19 - Job costs At the end of August, Rothchild Company...Ch. 19 - Transactions in a job order cost system Five...Ch. 19 - Cost of materials issuances under the FIFO method...Ch. 19 - Entry for issuing materials Materials issued for...Ch. 19 - Entries for materials GenX Furnishings...Ch. 19 - Entry for factory labor costs A summary of the...Ch. 19 - Entry for factory labor costs The weekly time...Ch. 19 - Entries for direct labor and factory overhead...Ch. 19 - Factory overhead rates, entries and account...Ch. 19 - Predetermined factory overhead rate Street....Ch. 19 - Predetermined factory overhead rate Poehling...Ch. 19 - Entry for jobs completed; cost of unfinished jobs...Ch. 19 - Entries for factory costs and jobs completed Old...Ch. 19 - Financial statements of a manufacturing firm The...Ch. 19 - Decision making with job order costs Alvarez...Ch. 19 - Decision making with job order costs Raneri...Ch. 19 - Job order cost accounting for a Service company...Ch. 19 - Job order cost accounting for a service company...Ch. 19 - Entries for costs in a job order cost system...Ch. 19 - Entries and schedules for unfinished jobs and...Ch. 19 - Job order cost sheet Remnant Carpet Company sells...Ch. 19 - Analyzing manufacturing cost accounts Fire Rock...Ch. 19 - Flow of costs and income statement Ginocera Inc....Ch. 19 - Entries for costs in a job order cost system Royal...Ch. 19 - Entries and schedules for unfinished Jobs and...Ch. 19 - Job order cost sheet Stretch and Trim Carpet...Ch. 19 - Analyzing manufacturing cost accounts Clapton...Ch. 19 - Flow of costs and income statement Technology...Ch. 19 - Communication TAC Industries sells heavy equipment...Ch. 19 - Predetermined overhead rates As an assistant cost...Ch. 19 - Communication Carol Creedence, the plant manager...Ch. 19 - Job order decision making and rate deficiencies...Ch. 19 - Recording manufacturing costs Todd Lay just began...

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