Question

Prepare journal entries to record the following production activities. Purchased $80,000 of raw materials on credit. Used $42,000 of direct materials in the Roasting department. Used $22,500 of indirect materials in production.

Answer 1

Purchases Debit $80,000

Accounts Payable Credit $80,000

Work in process Roasting Department Debit $42,000

Purchases Credit $42,000

Production Debit $22,500

Purchases Credit $22,500

What is Inventory?

Inventory is the current asset of a company which it sells to customers and gain profits, the inventory is also known as Stock. The raw material is converted into finished goods by manufacturing companies.

The purchases are debited with payable's account being credited and then the purchases/ inventory is issued for the production of goods, and is therefore charged as the work in process.

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