Chapter 11, Problem 15E

Potter Company has installed a JIT purchasing and manufacturing system and is using back-flush 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:

There were no beginning or ending inventories. All goods produced were sold with a 60 percent markup. Any variance is closed to Cost of Goods Sold. (Variances are recognized monthly.)

Required:

1. 1. Prepare the journal entries that would have been made using a traditional accounting approach for cost flows.
2. 2. Prepare the journal entries for the month using backflush costing.