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Hi.
I am having trouble understanding the meaning of this question.
Which of the following is correct according to its narrative.
(4 narratives included in the question but this one is confusing me)
Transfer of costs of repairs to buildings carried out by employees using materials from inventory.
Debit Purchases 14,000
Debit Wages 24,000
Credit Repairs to buildings 38,000The answer is
When repairs are carried out by an entity’s own staff using items of inventory, the correct journal to transfer the relevant costs to the repairs account isDebit Repairs
Cr Wages/Purchases.————————————-
I did not understand where they are transferring the costs from? And shouldn’t purchases be a debit?
In future you must ask in the Ask the Tutor Forum if you want me to answer (this forum is for students to help each other).
When we pay wages we debit the wages account, and then we pay for materials we debit the purchases account.
However if some of the wages and some of rate materials are used for repairs, then we transfer the cost to the repairs expense account.
So debit repairs and credit wages or purchases with the amount used on repairs.
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