Question

On November 1, Arvelo Corporation had $42,000 of raw materials on hand. During the month, the company purchased an additional $68,000 of raw materials. During November, $75,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. Prepare journal entries to record these events. Use those journal entries to answer the following question:The credits to the Raw Materials account for the month of November total:a) $75,000 b) $68,000 c) $42,000 d) $110,000

Answer 1

Answer:

a) $75,000

Explanation:

Given data about Arvelo Corporation;

On November 1

Cost of raw materials at hand = $42,000

Purchases during the month = $68,000

Raw materials requisitioned from storeroom (direct and indirect) = $75,000

Balance of inventory = $42,000 + $68,000 - $75,000

= $35,000

For the inventory amount requisitioned from the storeroom, the entries to be posted on issuance

Dr Cost of sale   $75,000

Cr Inventory (Raw materials)  $75,000

Being entries to recognize inventory issued for use.

The credits to inventory account in the month (November) is $75,000.

Answer 2

Answer:

Choice D)  $ 110,000

Explanation:

S. No                  Account                              Debit                       Credit

1                     Opening Inventory            $ 42,000

                            Profit and Loss Appropriation Account        $ 42,000

2               Raw Materials (Purchases)      $ 68,000

                          Cash                                                                   $ 68,000

3            Work In Process                          $ 75,000

                           Materials                                                         $ 70,000

                Indirect Materials                                                       $ 5000

Materials Account

Debits  

Opening Inventory             $ 42,000

Purchases                           $ 68,000

Credits

Work In Process                  $ 70,000

Ending In Inventory             $ 40,000

Total Credits                          $ 110,000

Only choice D is correct because

a) $ 75,000 contains both direct and indirect materials

c) $ 42,000 is the opening inventory which is a debit

b) $ 68,000 are  the purchases which are again a debit to material account