Question

Which of the following pair of journal entries correctly records the current month's activity where $125,000 of raw material was purchased for cash, and $75,000 of direct material and $30,000 of indirect materials were used in the production process?A. Cash 125,000 Raw Materials Inventory 125,000Raw Materials Inventory 105,000Goods in Process Inventory 75,000Factory Overhead 30,000B. Raw Materials Inventory 125,000 Cash 125,000Goods in Process Inventory 75,000 Factory Overhead 30,000 Raw Materials Inventory 105,000C. Raw Materials Inventory 125,000 Cash 125,000Raw Materials Inventory 105,000Goods in Process Inventory 75,000Factory Overhead 30,000D. Cash 125,000 Raw Materials Inventory 125,000Goods in Process Inventory 75,000 Factory Overhead 30,000 Raw Materials Inventory 105,000E. Raw Materials Inventory 125,000 Cash 125,000Goods in Process Inventory 125,000 Raw Materials Inventory 125,000

Answer 1

Answer: "B. Raw Materials Inventory 125,000 Cash 125,000 Goods in Process Inventory 75,000 Factory Overhead 30,000 Raw Materials Inventory 105,000".

Explanation: First we must register the purchase of the raw material that was paid in cash, therefore we debit the "raw material" account and credit the "cash" account.

Secondly, we must record the consumption of direct and indirect materials in the production process. Direct materials will become part of the "goods in process" account and indirect materials are considered "factory overhead."

We debit "goods in process" and "Factory Overhead" and credit the raw material inventory account for their respective amounts.

the registration would be:

Raw materials inventory    125000

                   Cash                             125000

--------------------------- - ---------------------------------------------

Goods in process               75000

Factory overhead               30000

                 Raw materials inventory   105000