Answer:
Dr Purchases/ Raw Material Inventory .......................80,000
Cr Bank/Account Payable....................................................80,000
Dr Work in Process ................................................................67,400
Cr Raw Material Inventory............................................................67,400
Explanation:
FOR PURCHASE OF MATERIAL
Dr Purchases/ Raw Material Inventory .......................80,000
Cr Bank/Account Payable....................................................80,000
Being purchase of 10,000 units of raw materials at $8 per unit
FOR MATERIAL FOR PRODUCTION
Dr Work in Process ................................................................67,400
Cr Raw Material Inventory............................................................67,400
Being materials used in production: 7,500 units at $8 per unit for job 200 and 1,480 units at $5 per unit for job 305
In relation to 'purchase of material' we debit the raw material inventory account because material is increasing and is an asset account; and we credit Bank if the materials have been paid for OR 'accounts payable', if the material has not yet been paid for.
In relation to 'requisition of material for production' we debit the raw material inventory account because material is decreasing and is an asset account; and we credit 'work in process' to assign the cost of materials to the ongoing jobs respectively.
