Question

Blue Water Sails, Inc. (BWS) manufactures sailcloth used by sailmakers that produce sails for sailboats. BWS’s sailcloth is the conventional polyester-based sail material and is used widely in recreational boating. Sailmakers throughout the world use BWS’s sailcloth. The manufacture of sailcloth has a small number of processes, and BWS integrates them carefully so that there is very little Work-in-Process Inventory. The product is measured in yards of cloth, which is prepared in rolls 42 inches wide. Because it has little Work-in-Process Inventory, BWS also uses backflush accounting to simplify the accounting for its operations. BWS has the following information for the most recent accounting period. The beginning inventory of polyester fiber was $140,600, and the ending inventory was $179,500.

Polyester fiber purchased	$	674,500
Conversion cost incurred	$	1,419,500
Direct materials standard cost	$	3.60	per yard of cloth
Conversion standard cost	$	8.16	per yard of cloth
Units produced		165,900	yards of cloth

Required:

1. Show the entries for manufacturing costs incurred or applied, completion of 165,900 yards of product, and the closing entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

a. Record Direct Materials Purchased

b. Record conversion cost incurred

c. Record finished goods for the standard cost of hte 165,900 yards produced

d. Record the closing of the two conversion cost accounts

e. Record the closing of the actual usage of inventory

Answer 1

Journal Entries
Particulars	Debit (in $)	Credit(in $)
Answer(a) material Purchased:-
Materials Inventories A/c Dr	674,500
To Accounts Payable/cash		674,500
Answer(b):- Conversion cost incurred
Conversion cost incurred a/c dr	1,419,500
To Wages payable,other accounts		1,419,500
Answer(c):-
Finished goods A/c dr	1,950,984
To Material Inventories		597,240
To conversion cost applied		1,353,744
Workings:-
Material inventories(165,900*3.60)
Conversion cost applied(165,900*8.16)
Finished goods (165,900)*(3.60+8.16)
Answer(d):-
Conversion cost applied A/c Dr	1,353,744
Cost of goods sold A/c dr(balancing figure)	65,756
To conversion cost incurred A/c		1,419,500
Answer(e):-
Cost of goods sold A/c dr	38,360
To material inventory		38,360
Working:-
Actual usage(140600+674500-179500)
635,600
Actual usage = 635600
Less: Standard(165900*3.6)=597240
Difference = 38360