Jack Thule just began working as a cost accountant for Toad Industries Inc., which manufactures gift items. Jack is preparing to record summary journal entries for the month.

Jack begins by recording the factory wages as follows:

Wages Expense......60,000

Wages Payable.......60,000

Then the factory depreciation:

Depreciation Expense—Factory Machinery........16,000

Accumulated Depreciation—Factory Machinery......16,000

Jack’s supervisor, Duke Fulbright, walks by and notices the entries. The following conversation takes place:

Duke: That’s a very unusual way to record our factory wages and depreciation for the month. Jack: What do you mean? This is exactly the way we were taught to record wages and depreciation in school. You know, debit an expense and credit Cash or payables, or in the case of depreciation, credit Accumulated Depreciation.

Duke: 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.

Jack: 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 Duke and answer Jack’s questions.

2. Why would Duke accept the journal entries if they were for administrative costs?