Flat Company uses a backflush-costing system to account for bicycles.Bicycles are scheduled for production only after orders are received and products are shipped to customers immediately upon completion.No finished goods inventory is maintained and product costs are applied directly to cost of goods sold.The standard cost for materials is $150 per bicycle.The standard cost for conversion costs is $75 per bicycle. During the current month,Flat Company purchased $9,000 of direct materials and incurred $5,300 in conversion costs to produce 40 bicycles.The journal entry to record the purchase of materials includes a debit to ________.
A)Materials Inventory
B)Work-in-Process Inventory
C)Finished Goods Inventory
D)Cost of Goods Sold

Question

Quizplus · Accepted Answer

Since Flat Company uses a backflush-costing system and does not maintain finished goods inventory, the purchased materials are directly applied to cost of goods sold. Therefore, the journal entry to record the purchase of materials would be a debit to Materials Inventory.

Flat Company Uses a Backflush-Costing System to Account for Bicycles