Question

The following transactions occurred during the month of October: October 5 Raw materials totaling $15,000 were purchased on account. October 8 Direct materials totaling $6,000 were placed in production. October 10 Indirect materials totaling $1,000 were placed in production. Required: a. Set up T-accounts for raw materials inventory, work-in-process inventory, manufacturing overhead, and accounts payable. b. Use the T-accounts established in part a to record the transactions for October.

Answer 1

Giving T accounts for the transactions given in the question.

1. Raw materials A/C

October 1. October 8.

To opening balance ??    By work in process $6000

( not given ) (Direct material )

By manufacturing $1000 Overhead ( Indirect )

October 5. October 31

To accounts payable $15,000 By Ending inventory $8000

( Purchase on account) ( Balance figures)

Total $15,000 Total $15,000.

2. Manufacturing overhead (O/H)

October 10 October 10

To Raw Materials A/C $1000 By work in process $1000

( indirect Material received)    (Transfer to production )

Total $1000 Total $1000.

Assumption: all the goods send to production at the end month will turn into finished goods

3. Work in process A/C

October 8 October 31

To Raw Materials A/C $6000  By finished goods $7000  

(Direct material received) (transfer to finished goods)

October 10

To manufacturing o/H $1000

(Indirect Material received)

Total $7000 total $7000.

4. Accounts Payable

October 1

By opening balance ??

( not given )

   October 8        By Raw materials a/c $15000

October 31

To Ending balance $15,000

(Balancing Figure)

Total $15,000 Total $15,000

Note:

* direct material transfers from raw materials to work in process directly.

** indirect material flows from raw materials to manufacturing overhead and then transfers to work in process directly

- Direct material: Material directly traceable to the finished goods example wood in table manufacturing

- Indirect material: Material which not directly traceable to the finished goods example glue in table manufacturing