Backflush costing Durham Denim uses backflush costing to account for production costs of its one-size-fits-all ponchos. During August, the firm produced 210,000 ponchos and sold 208,600. The standard cost for each poncho 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 $422,800 of direct material Incurred $851,200 of conversion costs Applied $840,000 of conversion costs to Raw and In-Process Inventory Finished 210,000 ponchos Sold 208,600 ponchos for $10 each a. Prepare journal entries using backflush costing using the method shown in Exhibit 18.12. Include the entry to close underapplied or overapplied overhead (assumed to be immaterial) to cost of goods sold. Account Debit Credit 1 To record purchase of material 2 To record the incurrence of conversion costs 3 To apply labor and overhead to units completed 4 To transfer completed goods from WIP 5 To record cost of goods sold 6 To close under- or applied overhead 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 To record cost of goods sold 6 0 0 To close under- or applied overhead 7 0 0 To record goods sold on account b. Calculate any inventory account balances at month-end. Raw and In-Process Inventory $ 0 Finished Goods Inventory $ 0 Check 5 4 O 4 0 0 0 0 0 0