menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

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.

BuyFindarrow_forward

Cornerstones of Cost Management (C...

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

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 11, Problem 17E
Textbook Problem
192 views

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.

1.

To determine

Journalize the transactions for the month of May using back flush costing, assuming that P Company uses the completion of goods as the only trigger point.

Explanation of Solution

Back flush costing: Back flush costing is a simplified approach for cost flow accounting that uses trigger points to determine when manufacturing costs are assigned to key inventory and temporary accounts.

Prepare journal entry to record the overhead cost incurred.

DateAccounts and ExplanationDebit ($)Credit ($)
Conversion Cost Control243,000 
      Wages Payable 40,500
     Accounts Payable 202,250
 (To record the overhead cost incurred)  

Table (1)

Description:

  • Conversion cost control is an expense account and it is increased. Therefore, debit the conversion cost control.
  • Wages payable is a liability account and it is increased. Therefore, credit the wages payable.
  • Accounts payable is a liability account and it is increased. Therefore, credit the accounts payable.

Prepare journal entry to record completion of goods.

DateAccounts and ExplanationDebit ($)Credit ($)
Finished Goods Inventory506,250 
       Accounts payable 243,000
       Conversion Cost Control 263,250
 (To record the completion of goods)  

Table (2)

Description:

  • Finished Goods Inventory is an asset account and it is increased. Therefore, debit the finished goods inventory.
  • Accounts payable is a liability account and it is increased. Therefore, credit the accounts payable.
  • Conversion Cost Control is an expense account and it is decreased. Therefore, credit the conversion cost control.

Prepare journal entry to record cost of goods sold...

2.

To determine

Journalize the transactions for the month of May using back flush costing, assuming that P Company uses the sale of goods as the only trigger point.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 11 Solutions

Cornerstones of Cost Management (Cornerstones Series)
Show all chapter solutions
add
Ch. 11 - What are the four stages of the consumption life...Ch. 11 - Life-cycle cost reduction is best achieved during...Ch. 11 - What is target costing? What role does it have in...Ch. 11 - Explain why JIT with dedicated cellular...Ch. 11 - Explain how backflush costing works.Ch. 11 - Woodruff Company is currently producing a...Ch. 11 - Ventana Company is a car window repair and...Ch. 11 - Deeds Company sells custom-made machine parts to...Ch. 11 - Kagle design engineers are in the process of...Ch. 11 - Hepworth Company has implemented a JIT system and...Ch. 11 - Keith Golding has decided to purchase a personal...Ch. 11 - San Jose Goodwill Bank has been experiencing...Ch. 11 - Classify the following cost drivers as structural,...Ch. 11 - McConkie Company has decided to pursue a cost...Ch. 11 - Jackson, Inc., manufactures motorcycles. Jackson...Ch. 11 - Assign the customer-related activity costs to each...Ch. 11 - The following series of statements or phrases are...Ch. 11 - Assume that a company has recently switched to JIT...Ch. 11 - Prior to installing a JIT system, Barker Company,...Ch. 11 - Potter Company has installed a JIT purchasing and...Ch. 11 - Potter Company has installed a JIT purchasing and...Ch. 11 - Potter Company has installed a JIT purchasing and...Ch. 11 - Bunker Company produces two types of glucose...Ch. 11 - Which of the following is a true statement about...Ch. 11 - Which of the following is a true statement about...Ch. 11 - This year, Hassell Company will ship 4,000,000...Ch. 11 - Standard Company has two suppliers: Day and...Ch. 11 - The second stage of customer-based activity-based...Ch. 11 - Evans, Inc., has a unit-based costing system....Ch. 11 - Cortalo, Inc., manufactures riding lawn mowers....Ch. 11 - Moss Manufacturing produces several types of...Ch. 11 - Maxwell Company produces a variety of kitchen...Ch. 11 - Pawnee Works makes machine parts for manufacturers...Ch. 11 - Nico Parts, Inc., produces electronic products...Ch. 11 - Jolene Askew, manager of Feagan Company, has...Ch. 11 - Homer Manufacturing produces different models of...Ch. 11 - Mott Company recently implemented a JIT...Ch. 11 - Southward Company has implemented a JIT flexible...Ch. 11 - Reddy Heaters, Inc., produces insert heaters that...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
Changes in sales cause changes in profits. Would the profit change associated with sales changes be larger or s...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Use a production possibilities frontier to describe the idea of efficiency.

Principles of Microeconomics (MindTap Course List)