West Allis Bike Shop 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,West Allis Bike Shop purchased $6,000 of direct materials and incurred $3,000 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

The journal entry to record the purchase of materials would include a debit to Materials Inventory, as materials are being added to inventory to be used in production. Since there is no Finished Goods Inventory, there would be no journal entry to record the cost of goods sold until bicycles are completed and shipped to customers.

West Allis Bike Shop Uses a Backflush-Costing System to Account