Potter Company has installed a JIT purchasing and manufacturing system and is using back-flush 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: There were no beginning or ending inventories. All goods produced were sold with a 60 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. 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.

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
BuyFind

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Solutions

Chapter 11, Problem 17E
Textbook Problem

Potter Company has installed a JIT purchasing and manufacturing system and is using back-flush 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:

Chapter 11, Problem 17E, Potter Company has installed a JIT purchasing and manufacturing system and is using back-flush

There were no beginning or ending inventories. All goods produced were sold with a 60 percent markup. Any variance is closed to Cost of Goods Sold. (Variances are recognized monthly.)

Required:

  1. 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.
  2. 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.

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Chapter 11 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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