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Multiple Choice
The journal entry to record the use of indirect materials in production is to:
A
Debit Finished Goods Inventory and credit Manufacturing Overhead
B
Debit Manufacturing Overhead and credit Raw Materials Inventory
C
Debit Raw Materials Inventory and credit Manufacturing Overhead
D
Debit Work in Process Inventory and credit Raw Materials Inventory
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Verified step by step guidance
1
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.