Carolina Hills Manufacturing has two processing departments, Department I and Department II. During the year, direct materials were assigned to the two production departments: $280,000 to Department I and $300,000 to Department II. During the period, $8,000 of indirect materials were used in production. Provide the journal entry to record this transaction. Process costing is used.

Journal Entry to record the transaction

Dr. Work in Process Department I          $280,000      

Dr. Work in Process Department II         $300,000      

Dr. Manufacturing Overhead                  $8,000

Cr. Material Inventory                               $588,000

Explanation:

The direct material is charged to the work in process account, because it is an direct expense and all the direct expenses are charged to the work in process account like indirect material, indirect labor etc.

The indirect material is charged to manufacturing overhead account because all the indirect expenses are charged to the manufacturing overhead account like indirect material, indirect labor etc.

These inventories are issued from the material inventory, so to deduct the issued value from the material inventory account, the total value of direct and indirect issuance is credited to record the effect.

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