QS 15-5 Labor journal entries LO P2 During the current month, a company that uses job order costing incurred a monthly factory payroll of $185,000. Of this amount, $51,000 is classified as indirect labor and the remainder as direct. Prepare journal entries to record these transactions.

The entry to record factory payroll is as follows

For direct labor

Work in process ( direct labor)  $ 134,000 Dr

Factory Overhead Payroll Account   $ 134,000 Cr

For indirect labor

Factory Overhead (indirect labor) $ 51,000 Dr

Factory Overhead Payroll Account   $ 51,000 Cr

No entry is made on any job - cost record, since indirect labor is not traceable to any particular job. In practise the above entries are combined to one compound entry as follows

Work in process ( direct labor)  $ 134,000 Dr

Factory Overhead (indirect labor) $ 51,000 Dr

Factory Overhead Payroll Account   $ 185,000 Cr

The total payroll is allocated to individual accounts for direct and indirect labor costs.

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