Backflush versus Traditional Costing: Variation 11 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 Direct labor cost $244,000 42,000 Overhead cost Conversion cost applied 210,750 273,000 "$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, (9) cost of sales, (h) revenue from sales, and (1) recognition of the variance between applied and actual production costs.. a. Materials Inventory Accounts Payable 244,000 244,000 b. Work-in-Process Inventory Materials Inventory 244,000 244,000 c. Work-in-Process Inventory 42,000 Sales Revenue 42,000 d. Overhead Control 210,750 Accounts Payable 210,750 a Work-in-Process Inventory Overhead Control f. Finished Goods Inventory Work-in-Process Inventory 9. Cost of Goods Sold Finished Goods Inventory h. Accounts Receivable Sales Revenue Overhead Control Cost of Goods Sold 231,000 231,000 | | | | 2. Prepare the journal entries for the month using backflush costing] 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. 2. Prepare the journal entries for the month using backflush costing. 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. b. d. 0 000 000 000 000 000 0 0 0