When direct labor costs are recorded, which of the following journal entries is correct?

• A. Debit Wages Payable; Credit Work in Process Inventory
• B. Debit Manufacturing Overhead; Credit Cash
• C. Debit Work in Process Inventory; Credit Wages Payable
• D. Debit Finished Goods Inventory; Credit Wages Expense

Answer: (C)

Verified step by step guidance

1. Understand the context: Direct labor costs are incurred during the production process and are directly traceable to specific jobs or products. These costs are recorded in the Work in Process Inventory account, as they contribute to the production of goods.
2. Identify the correct accounts: Direct labor costs increase the Work in Process Inventory account (an asset account) because they are part of the production costs. At the same time, they create a liability in the form of Wages Payable, which represents the amount owed to employees.
3. Determine the journal entry format: A journal entry must have a debit and a credit. In this case, debit the Work in Process Inventory account to increase it, and credit the Wages Payable account to record the liability.
4. Review the incorrect options: The other options provided involve accounts like Manufacturing Overhead, Finished Goods Inventory, and Wages Expense, which are not directly related to recording direct labor costs. Direct labor is not part of Manufacturing Overhead, Finished Goods Inventory is used after production is complete, and Wages Expense is typically used in non-manufacturing contexts.
5. Conclude the correct journal entry: The correct journal entry for recording direct labor costs is 'Debit Work in Process Inventory; Credit Wages Payable,' as this reflects the increase in production costs and the liability for wages owed.