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Potter Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion goods as the second trigger point. During the month of June, Potter had the following transactions: Raw materials purchased $245,000 Direct labor cost 42,000 210,250 273,000" Overhead cost Conversion cost applied "$42,000 labor plus $231,000 overhead. There were no beginning or ending inventories. All goods produced were sold with a 50 percent markup. Any variance is closed Cost of Goods Sold. (Variances are recognized monthly.) Required: 1. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave blank. Prepare your entries in the following order: (a) completion of goods, (b) cost of sales, (c) sales revenue, and (d) recognition of the variance between applied and actual production costs. progres

Potter Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion goods as the second trigger point. During the month of June, Potter had the following transactions: Raw materials purchased $245,000 Direct labor cost 42,000 210,250 273,000" Overhead cost Conversion cost applied "$42,000 labor plus $231,000 overhead. There were no beginning or ending inventories. All goods produced were sold with a 50 percent markup. Any variance is closed Cost of Goods Sold. (Variances are recognized monthly.) Required: 1. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave blank. Prepare your entries in the following order: (a) completion of goods, (b) cost of sales, (c) sales revenue, and (d) recognition of the variance between applied and actual production costs. progres

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter2: Accounting For Materials
Section: Chapter Questions
Problem 18E: For E2-17, prepare any journal entries that would have been different if the only trigger points had...
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Backflush versus Traditional Costing: Variations 3 and 4 Potter Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During the month of June, Potter had the following transactions: Raw materials purchased $245,000 Direct labor cost Overhead cost Conversion cost applied *$42,000 labor plus $231,000 overhead. There were no beginning or ending inventories. All goods produced were sold with a 50 percent markup. Any variance is closed to Cost of Goods Sold. (Variances are recognized monthly.) Required: 1. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) completion of goods, (b) cost of sales, (c) sales revenue, and (d) recognition of the variance between applied and actual production costs. a. Conversion Cost Control Accounts Payable Wages Payable Finished Goods Inventory Accounts Payable Conversion Cost Control b. Cost of Goods Sold Finished Goods Inventory c. Accounts Receivable Sales Revenue ✓ ✓ d. Conversion Cost Control Cost of Goods Sold ✓ ✓ ✓ 42,000 210,250 273,000* ✓ ✓ ✓ ✓ 252,250 ✓ 518,000 ✓ 518,000 ✓ 994,500 X 20,750 ✓ 210,250 42,000 245,000 273,000 518,000 ✓ 994,500 X 20,750 ✔
Transcribed Image Text:Backflush versus Traditional Costing: Variations 3 and 4 Potter Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During the month of June, Potter had the following transactions: Raw materials purchased $245,000 Direct labor cost Overhead cost Conversion cost applied *$42,000 labor plus $231,000 overhead. There were no beginning or ending inventories. All goods produced were sold with a 50 percent markup. Any variance is closed to Cost of Goods Sold. (Variances are recognized monthly.) Required: 1. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) completion of goods, (b) cost of sales, (c) sales revenue, and (d) recognition of the variance between applied and actual production costs. a. Conversion Cost Control Accounts Payable Wages Payable Finished Goods Inventory Accounts Payable Conversion Cost Control b. Cost of Goods Sold Finished Goods Inventory c. Accounts Receivable Sales Revenue ✓ ✓ d. Conversion Cost Control Cost of Goods Sold ✓ ✓ ✓ 42,000 210,250 273,000* ✓ ✓ ✓ ✓ 252,250 ✓ 518,000 ✓ 518,000 ✓ 994,500 X 20,750 ✓ 210,250 42,000 245,000 273,000 518,000 ✓ 994,500 X 20,750 ✔
b. Cost of Goods Sold Finished Goods Inventory c. Accounts Receivable Sales Revenue d. Conversion Cost Control Cost of Goods Sold Feedback ✓ Accounts Payable Wages Payable b. Sales Revenue X ✓ Conversion Cost Control ✓ Cost of Goods Sold Finished Goods Inventory ▼ X Accounts Receivable c. Conversion Cost Control ✓ Check My Work Backflush costing also requires journal entries similar to traditional inventory flow and overhead journal entries with some differences. Specifically, differences relate to the raw materials and in-process inventory (RIP) account and the conversion cost account. X Cost of Goods Sold - ✓ 2. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the sale of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) completion and sale of goods, (b) revenue from sales, and (c) recognition of the variance between applied and actual production costs. a. Conversion Cost Control 252,250 ✓ ✓ ✓ ▼ X 518,000 ✓ ✓ 994,500 X 20,750 ✓ 518,000 994,500 X 20,750 210,250 ✓ 42,000 ✓ 300 00 00
Transcribed Image Text:b. Cost of Goods Sold Finished Goods Inventory c. Accounts Receivable Sales Revenue d. Conversion Cost Control Cost of Goods Sold Feedback ✓ Accounts Payable Wages Payable b. Sales Revenue X ✓ Conversion Cost Control ✓ Cost of Goods Sold Finished Goods Inventory ▼ X Accounts Receivable c. Conversion Cost Control ✓ Check My Work Backflush costing also requires journal entries similar to traditional inventory flow and overhead journal entries with some differences. Specifically, differences relate to the raw materials and in-process inventory (RIP) account and the conversion cost account. X Cost of Goods Sold - ✓ 2. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the sale of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) completion and sale of goods, (b) revenue from sales, and (c) recognition of the variance between applied and actual production costs. a. Conversion Cost Control 252,250 ✓ ✓ ✓ ▼ X 518,000 ✓ ✓ 994,500 X 20,750 ✓ 518,000 994,500 X 20,750 210,250 ✓ 42,000 ✓ 300 00 00
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