Backflush, two trigger points, materials purchase and sale (continuation of 20-37). Assume the same facts for Acton Corporation as in Problem 20-37, except that now assume Acton uses a JIT production system and backflush costing with two trigger points for making entries in the accounting system:

■ Purchase of direct materials

■ Sale of finished goods

The inventory account is confined solely to direct materials, whether these materials are in a storeroom, in work in process, or in finished goods. No conversion costs are inventoried. They are allocated to the units sold at standard costs. Any under- or overallocated conversion costs are written off monthly to Cost of Goods Sold.

1. Prepare summary journal entries for August, including the disposition of under- or overallocated conversion costs. Acton has no direct materials variances.

2. Post the entries in requirement 1 to T-accounts for Inventory Control, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods Sold.

 

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