Lombardi Company manufactures a single product by a continuous process, involvin

Question

Lombardi Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000. respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000. $60,000. and $70,000, respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 1 during the period for direct materials is:

Explanation / Answer

Inventory Purchase

This is the initial inventory purchase, which is routed through the accounts payable system. The debit will be raw materials inventory. The entry is:

Materal Account Dr. 1,00,000

To Accounts payable 1,00,000

Move Raw Materials to Work in Process

If you are operating a production facility, then the warehouse staff will pick raw materials from stock and shift it to the production floor, possibly by job number. This calls for another journal entry to officially shift the goods into the work-in-process account, which is shown below:

Work in process A/c Dr. 1,00,000

To Material 1,00,000

So, a. is correct

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