(JIT journal entries) Cosmo Industries recorded the following transactions for its first month of operations:
|
(1) |
Direct Material Inventory |
24,000 |
|
|
Accounts Payable |
|
24,000 |
|
|
To record purchase of direct material |
|
|
|
|
(2) |
Work in Process Inventory |
24,000 |
|
|
Direct Material Inventory |
|
24,000 |
|
|
To record distribution of material to production |
|
|
|
|
(3) |
Conversion Cost Control |
40,000 |
|
|
Various accounts |
|
40,000 |
|
|
To record incurrence of conversion costs |
|
|
|
|
(4) |
Work in Process Inventory |
40,000 |
|
|
Conversion Cost Control |
|
40,000 |
|
|
To assign conversion cost to WIP |
|
|
|
|
(5) |
Finished Goods Inventory |
64,000 |
|
|
Work in Process Inventory |
|
64,000 |
|
|
To record completion of products |
|
|
|
|
(6) |
Accounts Receivable |
116,000 |
|
|
Sales |
|
116,000 |
|
|
To record sale of products |
|
|
|
|
Cost of Goods Sold |
62,000 |
|
|
|
Finished Goods Inventory |
|
62,000 |
|
|
To record cost of goods sold |
|
|
Because Cosmo employs JIT, the company’s CEO has asked how the accounting system could be simplified.
a. Prepare the journal entries, assuming that no transactions are recognized until goods are completed.
b. Prepare the journal entries, assuming that goods are shipped to customers as soon as they are completed and that no journal entries are recorded until goods are completed.
c. Prepare the journal entries, assuming that sale of product is the trigger point for journal entries.
d. Prepare the journal entries, assuming that sale of product is the trigger point for journal entries and that the firm uses backflush costing.