Question

A company that uses job order costing purchases $94,000 in raw materials for cash. It then uses $20,000 of raw materials as indirect materials and uses $65,300 of raw materials as direct materials. Prepare journal entries to record the (a) purchase of raw materials, (b) use of indirect materials, and (c) use of direct materials.

Answer 1

Journal entries in a job order costing system for the purchase and use of raw materials include debiting Raw Materials and crediting Cash for the purchase, debiting Manufacturing Overhead and crediting Raw Materials for the indirect materials, and debiting Work in Process and crediting Raw Materials for the direct materials.

Step-by-step explanation:

The student's question deals with recording journal entries in a job order costing system when raw materials are purchased and then used as either indirect or direct materials. To prepare the journal entries, we will use the information provided about the purchase and usage of raw materials.

Purchase of Raw Materials

(a) The journal entry to record the purchase of raw materials for cash would be:

Debit Raw Materials $94,000

Credit Cash $94,000

Use of Indirect Materials

(b) The journal entry for the use of indirect materials that are placed into manufacturing overhead would be:

Debit Manufacturing Overhead $20,000

Credit Raw Materials $20,000

Use of Direct Materials

(c) The journal entry for the use of direct materials would be:

Debit Work in Process $65,300

Credit Raw Materials $65,300

These entries correctly reflect the raw materials purchased and the allocation as either indirect materials (part of overhead) or direct materials (charged to specific jobs).