Question

A company purchases 54,000 of raw materials on account. Which of the following journal entries correctly records this transaction?

(a) Debit Raw Materials Inventory 54,000; Credit Accounts Payable 54,000

(b) Debit Accounts Payable 54,000; Credit Raw Materials Inventory 54,000

(c) Debit Raw Materials Inventory 54,000; Credit Cash 54,000

(d) Debit Accounts Payable 54,000; Credit Cash 54,000

Answer 1

The correct journal entry is (a) Debit Raw Materials Inventory 54,000; Credit Accounts Payable 54,000.

Step-by-step explanation:

The correct journal entry to record the purchase of 54,000 of raw materials on account is:

(a) Debit Raw Materials Inventory 54,000; Credit Accounts Payable 54,000

This entry recognizes an increase in Raw Materials Inventory, which is an asset account, and an increase in Accounts Payable, which is a liability account. Since the company purchases materials on account, it means they owe the supplier and the amount will be paid in the future.