Question

7. O’Brien Vineyards recorded the following transactions for the month just completed. Please prepare the journal entries.

a. $60,000 in raw materials were purchased on account.

b. $51,000 in raw materials were requisitioned for use in production. Of this amount, $42,000 was for direct materials and the remainder was for indirect materials.

c. Total labor wages of $92,000 were incurred and paid. Of this amount, $81,000 was for direct labor and the remainder was for indirect labor.

Answer 1

• All Journal Entries as asked

Transaction	Accounts title	Debit	Credit
(a)	Raw Material Inventory	$            60,000.00
	Accounts Payable		$           60,000.00
	(Material purchased on account)
(b)	Work In Process Inventory	$            42,000.00
	Manufacturing Overhead	$              9,000.00
	Raw Material Inventory		$           51,000.00
	(Direct material transferred to WIP and Indirect to Overheads)
(c ) -1	Wages Expense - Labor Cost	$            92,000.00
	Cash		$           92,000.00
	(Labor Cost incurred & paid)
(c ) -2	Work In Process Inventory	$            81,000.00
	Manufacturing Overhead	$            11,000.00
	Wages Expense - Labor Cost		$           92,000.00
	(Labor cost transferred to WIP and Overheads)

• Explanations:

>Entry no. (b) Direct raw material requisitioned goes to WIP Inventory, while indirect material is taken to Overhead account.

>Entry no. (c -2) Indirect Labor is debited to Overheads account, rest is taken to WIP Inventory.