On November 1, Arvelo Corporation had $42,000 of raw materials on hand. During the month, the company purchased an additional $68,000 of raw materials. During November, $75,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. Prepare journal entries to record these events. Use those journal entries to answer the following question:The credits to the Raw Materials account for the month of November total:a) $75,000 b) $68,000 c) $42,000 d) $110,000

Choice D) $ 110,000

Explanation:

S. No Account Debit Credit

1 Opening Inventory $ 42,000

Profit and Loss Appropriation Account $ 42,000

2 Raw Materials (Purchases) $ 68,000

Cash $ 68,000

3 Work In Process $ 75,000

Materials $ 70,000

Indirect Materials $ 5000

Materials Account

Debits

Opening Inventory $ 42,000

Purchases $ 68,000

Credits

Work In Process $ 70,000

Ending In Inventory $ 40,000

Total Credits $ 110,000

Only choice D is correct because

a) $ 75,000 contains both direct and indirect materials

c) $ 42,000 is the opening inventory which is a debit

b) $ 68,000 are the purchases which are again a debit to material account

a) $75,000

Explanation:

Given data about Arvelo Corporation;

On November 1

Cost of raw materials at hand = $42,000

Purchases during the month = $68,000

Raw materials requisitioned from storeroom (direct and indirect) = $75,000

Balance of inventory = $42,000 + $68,000 - $75,000

= $35,000

For the inventory amount requisitioned from the storeroom, the entries to be posted on issuance

Dr Cost of sale $75,000

Cr Inventory (Raw materials) $75,000

Being entries to recognize inventory issued for use.

The credits to inventory account in the month (November) is $75,000.