On August 1, Shead Corporation had $27,000 of raw materials on hand. During the
ID: 2420479 • Letter: O
Question
On August 1, Shead Corporation had $27,000 of raw materials on hand. During the month, the company purchased an additional $82,400 of raw materials. During August, $84,000 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 $7,000. Prepare journal entries to record these events. Use those journal entries to answer the following questions: The credits to the Raw Materials account for the month of August total:
Explanation / Answer
1) Journal Entries
Entry for purchase of raw material
Raw Material Inventory debit $ 82,400
Account Payable credit $ 82,400
( Assuming the raw material is bought on account )
Entry for issue of direct raw material to production
Work in process debit $ 77,000
Raw Material Inventory credit $ 77,000
Entry for issue of indirect raw material to production
Factory Overhead debit $ 7,000
Raw Material Inventory credit $ 7,000
2) Credit to Raw Material Inventorty for the month = $ 84,000
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