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Homework answers / question archive / Uniq Works purchased raw materials amounting to $130,000 on account and $18,000 for cash
Uniq Works purchased raw materials amounting to $130,000 on account and $18,000 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? 148.000 148,000 O A. Finished Goods Inventory Accounts Payable OB. Work-in - Process Inventory Accounts Payable OC. Raw Materials Inventory 148,000 148.000 148,000 1 Click to select your answer
burces Uniq Works purchased raw materials amounting to $130,000 on account and $18,000 for cash. The materials will be used to manufacture upholstery fo manufacturers on a contract basis. Which of the following journal entries correctly records this transaction? OC. Raw Materials Inventory 148,000 Cash 18,000 Accounts Payable 130,000 OD. Accounts Payable 130,000 Cash 18.000 Raw Materials Inventory 148,000
Option A is incorrect as Uniq Works is puchasing raw material for furniture so the term "finished goods inventory" account cannot be used as the right account for journal entry is Raw material inventory. Another thing is raw material is bought partly on cash partly on account so both account will be credited in entry not just Accounts Payable.
Option B is incorrect as Uniq Works is puchasing raw material for furniture so the term "work-in-progress inventory" account cannot be used as the right account for journal entry is Raw material inventory and we cannot credit Accounts Payable account as raw material is bought partly on cash and partly on account.
Option C is correct as Uniq Works is puchasing raw material for furniture so the term "Raw material Inventory" is used correctly here. Another thing is raw material is bought for $18,000 on cash and $130,000 on account so both account will be credited and in this entry both accounts are credited with right amount . So, this is the correct option.
Option D is incorrect as Raw material Inventory acccount is credited in this enrty while we debit inventory accounts because inventories are part of current assets as per accounting rules. Another thing is when we buy something and cash is paid then it got credited as per accounting rule which states "Debit what comes in and credit what goes out" and in this entry cash account is debited which is wrong. When we buy on credit then the seller will become laibility and payable for us. So, we will credit our liabilities and in this entry Accounts payable is debited which is again wrong.
