80.2K

Verified Solution

Link Copied!

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	42,000
Overhead cost	210,250
Conversion cost applied	273,000*

^*$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 that would have been made using a traditional accounting approach for cost flows. Make your entries in the following order: (a) purchase of raw materials, (b) issuance of materials to production, (c) incurrence of direct labor cost, (d) incurrence of overhead cost, (e) application of overhead to production, (f) completion of goods, (g) cost of sales, (h) revenue from sales, and (i) recognition of the variance between applied and actual production costs.

Accounts Payable Accounts Receivable Conversion Cost Control "OPTIONS Cost of Goods Sold Raw Materials and In Process Inventory Accounts Payable Accounts Receivable Conversion Cost Control Accounts Receivable Cost of Goods Sold Conversion Cost Control d. Finished Goods Inventory Cost of Goods Sold Accounts Payable Accounts Receivable Finished Goods Inventory Wages Payable e. Cash Cost of Goods Sold . Materials Inventory Materials Inventory Overhead Control g. Sales Revenue Wages Payable Work-in-Process Inventory h i 2. Prepare the journal entries for the month using backflush oosting. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) purchase of raw materials, (b) Incurrence of direct labor and overhead costs, (c) completion of goods, (d) cost of sales, (e) sales revenue, and (f) recognition of the variance between applied and actual production costs. a. O b. I II III III 0 0 0 000 000 0 d. e. f

Answer & Explanation Solved by verified expert

See Answer