Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold.

Which of the following journal entries properly reflects the purchase of materials under backflush costing?

Question

Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold.

Which of the following journal entries properly reflects the purchase of materials under backflush costing?

Quizplus · Accepted Answer

In backflush costing, no inventory accounts are kept for direct materials or work-in-process, so no journal entries are made for these accounts. Instead, journal entries are made for the purchase of materials (debiting the cost of goods sold account and crediting the accounts payable account) and for the sale of finished goods (debiting the accounts receivable account and crediting the revenue account). The correct journal entry for the purchase of materials under backflush costing is shown in option A, which debits the cost of goods sold account and credits the accounts payable account.

Vision Company Manufactures Digital Cameras