Multiple Choice
Which of the following is the correct journal entry to record the reimbursement of the petty cash fund when expenses have been incurred and paid from petty cash?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
The journal entry to record the use of indirect materials in process costing is to:
A
Debit Work in Process Inventory and credit Raw Materials Inventory
B
Debit Manufacturing Overhead and credit Raw Materials Inventory
C
Debit Finished Goods Inventory and credit Manufacturing Overhead
D
Debit Raw Materials Inventory and credit Manufacturing Overhead
Verified step by step guidance1
Understand the concept of indirect materials: Indirect materials are materials used in the production process that cannot be directly traced to a specific product. These are typically included in manufacturing overhead rather than directly in Work in Process Inventory.
Review the role of Manufacturing Overhead: Manufacturing Overhead includes all indirect costs associated with production, such as indirect materials, indirect labor, and factory utilities. These costs are accumulated in the Manufacturing Overhead account before being allocated to Work in Process Inventory.
Analyze the journal entry options: The correct journal entry for recording the use of indirect materials involves debiting Manufacturing Overhead (to increase the account for the indirect costs incurred) and crediting Raw Materials Inventory (to decrease the account for the materials used).
Understand why other options are incorrect: For example, debiting Work in Process Inventory directly would be incorrect because indirect materials are not directly traceable to specific products. Similarly, Finished Goods Inventory is not involved at this stage of production, and debiting Raw Materials Inventory would not reflect the proper allocation of costs.
Formulate the correct journal entry: The correct journal entry is to debit Manufacturing Overhead and credit Raw Materials Inventory, reflecting the use of indirect materials in the production process.
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