Portside Watercraft uses a job order costing system. During one month Portside purchased $173,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Portside incurred a factory payroll of $95,000, of which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of direct labor cost. The journal entry to record the issuance of materials to production is:
A) Debit Raw Materials Inventory $153,000; credit Accounts Payable $153,000.
B) Debit Work in Process Inventory $140,000; debit Factory Overhead $24,000; credit Raw Materials Inventory $164,000.
C) Debit Raw Materials Inventory $195,000; credit Work in Process Inventory $195,000.
D) Debit Work in Process Inventory $140,000; debit Raw Materials Inventory $24,000; credit Materials Inventory $164,000.
E) Debit Finished Goods Inventory $140,000; credit Raw Materials Inventory $140,000.

Question

Quizplus · Accepted Answer

The journal entry to record the issuance of materials to production in a job order costing system is to debit Work in Process Inventory for the direct materials used and Factory Overhead for the indirect materials used, and credit Raw Materials Inventory for the total cost of the materials issued. Therefore, the correct answer is B, which records the issuance of $164,000 of direct and indirect materials to production by debiting $140,000 to Work in Process Inventory and $24,000 to Factory Overhead, and crediting $164,000 to Raw Materials Inventory.

Portside Watercraft Uses a Job Order Costing System