Question

Uniq Works purchased raw materials amounting to $126,000 on account and $16,000 for cash. The materials will be used to manufacture upholstery for furniture manufacturers on a contract basis. Which of the following journal entries correctly records this transaction?

a
Accounts Payable 126,000 Cash 16,000 Raw Materials Inventory 142,000
b
Work-in-Process Inventory 142,000 Accounts Payable 142,000
c
Raw Materials Inventory 142,000 Cash 16,000 Accounts Payable 126,000
d
Finished Goods Inventory 142,000 Accounts Payable 142,000

Answer 1

Answer:

The correct answer is Option C (Raw Materials Inventory 142,000 Cash 16,000 Accounts Payable 126,000)

Explanation:

Particulars	Debit	Credit
Raw material inventory Dr	$ 1,42,000
To Cash		$ 16,000
To Accounts payable		$ 1,26,000
(Narration - To record purchase of raw materials)

• Raw materials inventory is debited as there is acquisition of stock which means stock is increasing stock is a current asset and increase is assets is debited.
• There is payment of cash of $ 16,000 so it is credited as money is diminishing .
• Accounts payable of $ 1,26,000 is credited as this sum is still to be paid and liability increases