Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

The journal entry to record the use of indirect materials in production is to:

Debit Finished Goods Inventory and credit Manufacturing Overhead

Debit Manufacturing Overhead and credit Raw Materials Inventory

Debit Raw Materials Inventory and credit Manufacturing Overhead

Debit Work in Process Inventory and credit Raw Materials Inventory

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Verified step by step guidance

Understand the concept of indirect materials: Indirect materials are materials used in production that cannot be directly traced to specific products. These are typically recorded as part of manufacturing overhead.

Identify the correct accounts involved: When indirect materials are used, the Manufacturing Overhead account is debited to reflect the cost being added to overhead, and the Raw Materials Inventory account is credited to reduce the inventory of materials.

Analyze the options provided: The correct journal entry should debit Manufacturing Overhead (to increase the overhead cost) and credit Raw Materials Inventory (to decrease the inventory of indirect materials).

Eliminate incorrect options: For example, debiting Finished Goods Inventory or Work in Process Inventory would not be appropriate for indirect materials, as these accounts are used for direct costs or completed goods.

Select the correct journal entry: Based on the analysis, the correct journal entry is 'Debit Manufacturing Overhead and credit Raw Materials Inventory.' This reflects the proper accounting treatment for the use of indirect materials in production.