Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased.Information for raw materials for Product RBI for the month of October follows: What is the entry to record the purchase of materials?

Question

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased.Information for raw materials for Product RBI for the month of October follows:  What is the entry to record the purchase of materials?

Quizplus · Accepted Answer

Since Thomas Company recognizes the materials purchase price variance at the time materials are purchased, the entry to record the purchase of materials should reflect the actual cost paid for the materials as well as any variance. The 7,000 reflects the actual cost paid, and the 400 reflects the materials purchase price variance. The Materials account is debited for the total cost (7,000), and the Material Purchase Price Variance account is credited for the variance (400). Finally, the Accounts Payable account is credited for the total cost of the materials (6,600). Therefore, the entry should be: Materials 7,000; Material purchase price variance 400; Accounts payable 6,600.

Thomas Company Uses a Standard Cost System and Recognizes the Materials