Durham Denim uses backflush costing to account for production costs of its clothing line. During August 2010, the firm produced 150,000 garments and sold 149,000. The standard cost for each garment is:

Direct material .......$2

Conversion costs ...... 4

Total cost .........$6

The firm had no inventory on August 1. The following events took place in August:

• Purchased $302,000 of direct material

• Incurred $608,000 of conversion costs

• Applied $600,000 of conversion costs to Raw and In-Process Inventory

• Finished 150,000 garments

• Sold 149,000 garments for $10 each

a. Prepare journal entries using backflush costing with a minimum number of entries.

b. Post the amounts in (a) to T-accounts.

c. Explain any inventory account balances.