Question

1. Backflush Costing

   Hepworth Company has implemented a JIT system and is considering the use of backflush costing. Hepworth had the following transactions for the current fiscal year:

   1. Purchased raw materials on account for $750,000.
   2. Placed all materials received into production.
   3. Incurred actual direct labor costs of $112,500.
   4. Incurred actual overhead costs of $781,000.
   5. Applied conversion costs of $843,000.
   6. Completed all work for the month.
   7. Sold all completed work.
   8. Computed the difference between actual and applied costs.

   Required:

   1. Prepare the journal entries for traditional costing.

   1.	Materials Inventory
   	Accounts Payable
   2.	Work-in-Process Inventory
   	Materials Inventory
   3.	Work-in-Process Inventory
   	Wages Payable
   4.	Overhead Control
   	Accounts Payable
   5.	Work-in-Process Inventory
   	Overhead Control
   6.	Finished Goods Inventory
   	Work-in-Process Inventory
   7.	Cost of Goods Sold
   	Finished Goods Inventory
   8.	Cost of Goods Sold
   	Overhead Control

   Prepare the journal entries for backflush costing. Assume there are two trigger points: (1) the purchase of raw materials and (2) the completion of the goods. If no entry is required, select "No entry required" and leave the amount boxes blank or enter "0". For a compound transaction, if an amount box does not require an entry, leave it blank.

   1.	Raw Materials and In Process Inventory
   	Accounts Payable
   2.
   3 & 4.
   5.
   6.
   7.
   8.

   2. Assume the second trigger point in Requirement 1 is the sale of goods. If an amount box does not require an entry, leave it blank.

   What would change for the backflush-costing journal entries?

     with the following entry.

   3. Assume there is only one trigger point and it is (a) completion of the goods or (b) sale of goods. If an amount box does not require an entry, leave it blank.

   How would the backflush costing journal entries differ from Requirement 1 for (a)?

     with the following entry.

   How would the backflush costing journal entries differ from Requirement 1 for (b)? If an amount box does not require an entry, leave it blank.

     with the following entry.

Check My Work1 more Check My Work uses remaining.

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Answer 1

journal entries for traditional costing.

date	particular	Debit	Credit
1	Materials Inventory	$750000
	Accounts payable		$750000
	(to record purchase of inventory )
2	Work-in-Process Inventory	$750000
	Materials Inventory		$750000
	(to record material send to wip )
3	Work-in-Process Inventory	$1,12,500
	Wages payable		$1,12,500
	(to record Incurred actual direct labor costs )
4	Overhead Control	$7,81,000
	Accounts payable		$7,81,000
	( to record Incurred actual overhead costs )
5	Work-in-Process Inventory (843000-112500)	$730500
	Overhead control		$730500
	(to record Applied conversion cost)
6	Finished Goods Inventory(750000+112500+730500)	$1593000
	Work-in-Process Inventory		$1593000
	( to record Completed all work of goods )
7	Cost of Goods Sold	$ 1593000
	Finished Goods Inventory		$1593000
	( to record cost of goods sold )
8	Cost of Goods Sold (781000-730500)	$50500
	Overhead control		50500
	(difference between actual and applied costs)

	Backflush Journal Entries: Variation 1
1	Raw Materials and In Process Inventory	$750000
	Accounts payable		$750000
2	Placed all materials received into production.	no entry
3&4	Incurred actual direct labor costs of .(Combined with OH)
5	Conversion Cost Control	$893500
	Wages payble		$112500
	Accounts payble (oh)		$781000
	(overhead cost incurr)
	Finished Goods Inventory	$1593000
	Raw Materials and In Process inventory		$750000
	Conversion Cost Control		$843000
	(complition of goods )
	Cost of Goods Sold	$ 1593000
	Finished Goods Inventory		$1593000
	cost of goods sold	50500
	Conversion Cost Control(893500-843000)		50500

	Accounts Receivable	2054375
	Sales revenue (750000+112500+781000)/80		2054375

3)

	Conversion Cost Control	$893500
	Accounts payable		$112500
	Wages payable		$781000
	Cost of Goods Sold	1593000
	Finished goods inventory		1593000
	cost of goods sold	50500
	Conversion Cost Control		50500
	Accounts Receivable	2054375
	Sales revenue (750000+112500+781000)/80		2054375

here we assume cost equal to 80%