Question

Tamara is a Managerial Accountant at Everything New. Everything New manufactures furniture. Tamara purchased leather to be used on some of the furniture. Into which inventory account should she record the purchase?
A. Finished Goods Inventory
B. Raw Materials
C. Merchandise Inventory
D. Goods-In-Process

Answer 1

Answer:

B. Raw Materials

Explanation:

Raw materials are the basic components of manufacturing and production process in a goods manufacturing entity.  Raw Materials  are used in the production of a finished products (such as Crude Oil is a raw material for Petrol, Milk is a raw material for Yogurt, Yarn is a raw material for Garment whereas  Petrol, Yogurt and Garment are the finished products).

Keeping in view the above discussion, the leather purchased by the Tamara, to be used on some of the furniture to be manufactured by the Everything New, shall be classified as Raw Materials.

Answer is B. Raw Materials