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 process costing is to:

Debit Work in Process Inventory and credit Raw Materials Inventory

Debit Manufacturing Overhead and credit Raw Materials Inventory

Debit Finished Goods Inventory and credit Manufacturing Overhead

Debit Raw Materials Inventory and credit Manufacturing Overhead

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Verified step by step guidance

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.