Mostly need assistance with 2. Thanks! **Backflush versus Traditional Costing: Variations 3 and 4**Potter Company has installed a Just-In-Time (JIT) purchasing and manufacturing system and uses backflush accounting for its cost flows. The company employs a two-trigger approach: the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During June, Potter had the following transactions:- Raw materials purchased: $245,000- Direct labor cost: $42,000- Overhead cost: $210,250- Conversion cost applied: $273,000(Note: *$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 for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. For compound transactions, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) completion of goods, (b) cost of sales, (c) sales revenue, and (d) recognition of the variance between applied and actual production costs. a. **Completion of Goods:** - Conversion Cost Control: $252,250 - Accounts Payable: $210,250 - Wages Payable: $42,000 - Finished Goods Inventory: $518,000 - Conversion Cost Control: $273,000 b. **Cost of Sales:** - Cost of Goods Sold: $518,000 - Finished Goods Inventory: $518,000 c. **Sales Revenue:** - Accounts Receivable: $994,500 - Sales Revenue: $994,500 d. **Recognition of Variance:** - Conversion Cost Control: $20,750 - Cost of Goods Sold: $20,750 ### Educational Content: Understanding Backflush Costing Journal EntriesIn this example, we're focusing on backflush costing journal entries, which are slightly different from traditional inventory and overhead accounting. Specifically, backflush costing impacts the raw materials and in-process inventory (RIP) account and the conversion cost account.#### Example Entries:1. **Journal Entries for Backflush Costing:** The image above illustrates how backflush costing requires certain journal entries. Let's break down these entries: - **(a) Completion and Sale of Goods:** - **Debit**: Cost of Goods Sold $518,000 - **Credit**: Finished Goods Inventory $518,000 - **(b) Recognition of Revenue:** - **Debit**: Accounts Receivable $994,500 - **Credit**: Sales Revenue $994,500 - **(c) Conversion Cost Recognition:** - **Debit**: Conversion Cost Control $20,750 - **Credit**: Cost of Goods Sold $20,750 In each case, correct entries are highlighted with a checkmark.2. **Journal Entries for May (Using Backflush Costing):** Potter uses the sale of goods as the trigger point. The entries are made in the following sequence: - **Conversion Cost Control:** - **Debit**: Conversion Cost Control $252,250 - **Credit**: Accounts Payable $210,250 - **Credit**: Wages Payable $42,000 - **Sales Revenue and Conversion Cost:** - **Debit**: Sales Revenue (amount not specified) - **Credit**: Conversion Cost Control (amount not specified) These entries illustrate the key differences and steps in accounting for production costs under a backflush costing system, highlighting the importance of understanding specific costing techniques used in inventory management. ### Key Feedback:Backflush costing requires entries akin to traditional inventory methods but with essential adjustments to the raw materials and conversion cost accounts. Ensure accurate entries for variance recognition between applied and actual production costs.This explanation provides an overview of how backflush costing affects journal entries, emphasizing the unique elements of this accounting method.

Backflush Costing A just-in-time (JIT) inventory management system typically uses backflush costing,…

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 goods as the second trigger point. During the month of June, Potter had the following transactions: Raw materials purchased $245,000 Direct labor cost 42,000 210,250 273,000" Overhead cost Conversion cost applied "$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 Cost of Goods Sold. (Variances are recognized monthly.) Required: 1. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. For a compound transaction, if an amount box does not require an entry, leave blank. Prepare your entries in the following order: (a) completion of goods, (b) cost of sales, (c) sales revenue, and (d) recognition of the variance between applied and actual production costs. progres