Question

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 $244,000 Direct labor cost 41,000 Overhead cost 204,750 Conversion cost applied 266,500 *$41,000 labor plus $225,500 overhead. 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.)

Answer 1

1)
Account Titles and explanation	Debit	Credit
Conversion Cost Control	$ 245,750.00
Accounts Payable		$ 204,750.00
Wages Payable		$   41,000.00
Finished Goods Inventory	$ 510,500.00
Accounts Payable		$ 244,000.00
Conversion Cost Control		$ 266,500.00
Cost of Goods Sold	$ 510,500.00
Finished Goods Inventory		$ 510,500.00
Accounts Receivable( 244000+41000+204750)/60%	$ 816,250.00
Sales Revenue		$ 816,250.00
Conversion Cost Control (266500 - 245,750)	$   20,750.00
Cost of Goods Sold		$   20,750.00
2)
Account Titles and explanation	Debit	Credit
Conversion Cost Control	$ 245,750.00
Accounts Payable		$ 204,750.00
Wages Payable		$   41,000.00
Cost of Goods Sold	$ 510,500.00
Finished Goods Inventory		$ 510,500.00
Accounts Receivable( 244000+41000+204750)/60%	$ 816,250.00
Sales Revenue		$ 816,250.00
Conversion Cost Control (266500 - 245,750)	$   20,750.00
Cost of Goods Sold		$   20,750.00