Question 1

To comply with GAAP, backflush cost numbers can be adjusted by recording a journal entry.

Accepted Answer

To comply with GAAP, backflush cost numbers can be adjusted by recording a journal entry. This is because GAAP requires that all transactions and financial information be recorded accurately and transparently, and adjusting for any inaccuracies in cost accounting is necessary to ensure that financial statements are presented fairly and accurately.

Question 2

Games R Us manufactures various games. For March, 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 conversion costs are allocated under backflush costing.

Which of the journal entries properly records conversion costs?

A) 
B) 
C) 
D)

Accepted Answer

The answer of Games R Us manufactures various games. For...

Question 3

Games R Us manufactures various games. For March, 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 conversion costs are allocated under backflush costing.

Which of the following journal entries properly records the purchase of direct materials?
A) 
B) 
C) 
D)

Accepted Answer

Journal entry B records the purchase of direct materials by debiting raw materials inventory and crediting accounts payable. This is the appropriate journal entry for backflush costing, which only records materials purchases and conversion cost allocations.

Question 4

A positive aspect of backflush costing is the presence of the visible audit trail.

Accepted Answer

In backflush costing, the visible audit trail diminishes.

Question 5

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?
A) 
B) 
C) 
D)

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.

Question 6

Tornado Electronics manufactures stereos. All processing is initiated when an order is received. For April there were no beginning inventories. Conversion Costs and Direct Materials are the only manufacturing cost accounts. Direct Materials are purchased under a just-in-time system. Backflush costing is used with a finished goods trigger point. Additional information is as follows:
  
Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.

Accepted Answer

The answer of Tornado Electronics manufactures stereos. All processing is...

Question 7

The journal entry to dispose of the difference between actual conversion costs incurred and standard conversion costs allocated is different under backflush costing and sequential tracking.

Accepted Answer

The journal entry to dispose of the difference between actual conversion costs incurred and standard conversion costs allocated is exactly the same under backflush costing and sequential tracking.

Question 8

A firm using a backflush costing system will always use actual costs rather than standard costs.

Accepted Answer

A firm using a backflush costing system can use standard costs as well as actual costs.

Question 9

Which of the following statements is true of a backflush costing system?
A) All costs are tracked sequentially as products pass through each stage of production.
B) When inventories are minimal, as in JIT production systems, backflush costing complicates costing systems.
C) Usage of a backflush costing system does not satisfy the absorption costing rules of GAAP
D) Backflush costing increases the ability of the accounting system to pinpoint the uses of resources at each step in the production process.

Accepted Answer

Backflush costing simplifies the accounting process, especially in environments with minimal inventories like JIT systems, by delaying the recording of costs until the completion of goods. This approach may not align with GAAP's absorption costing rules, which require allocating all manufacturing costs to products as they are incurred.

Question 10

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.

If the two trigger points are completion of good finished units of product and sale of finished goods, which of the following entries would be used to record cost of finished units completed under backflush costing? (Round intermediate calculations to the nearest cent and final calculations to the nearest dollar.)
A) 
B) 
C) 
D)

Accepted Answer

Finished Goods = 89,500 × $4.11 = $368,200
Accounts Payable Control = 89,500 × $2.93 = $262,575
Conversion Costs Allocated = 89,500 × $1.18 = $105,625

Question 11

Companies that utilize backflush costing typically prorate underallocated or overallocated conversion costs between work-in-process, finished goods, and cost of goods sold.

Accepted Answer

Companies that use backflush costing typically have low inventories so that prorating underallocated or overallocated conversion costs between work in process, finished goods, and cost of goods sold is seldom necessary.

Question 12

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Accepted Answer

The accounting procedures in a backflush-costing system do not strictly adhere to Generally Accepted Accounting Principles (GAAP).

Question 13

Games R Us manufactures various games. For March, 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 conversion costs are allocated under backflush costing.

Which of the following entries properly records the cost of goods sold for the month?
A) 
B) 
C) 
D)

Accepted Answer

(Conversion costs of $410,000 + Direct Materials Purchased of $1,130,000)/59,800 units produced x 49,800 units sold = $1,282,475.

Question 14

Under backflush costing approach where three trigger points are used (stage A, stage C, and stage D), the purchase of materials is:
A) credited to the Materials and In-Process Inventory Control account
B) debited to the Materials and In-Process Inventory Control account
C) debited to the Materials Inventory Control account
D) ignored because the manufacturing process moves so quickly from acquisition of materials to the sale of the finished good

Accepted Answer

Under backflush costing approach, the purchase of materials is debited to the Materials and In-Process Inventory Control account. This account serves as a control account, which accumulates the cost of materials and the cost of converting them into finished goods through the different trigger points.

Question 15

In a backflush-costing system, no record of work in process appears in the accounting records.

Accepted Answer

Backflush-costing system is a system of determining the cost of a product by calculating backwards from the time of sale. This system assumes that all materials are used when the product is sold and no record is kept of the work in process. Therefore, there is no record of work in process in the accounting records in a backflush-costing system.

Question 16

Corry Corporation manufactures filters for cars, vans, and trucks. A backflush costing system is used and standard costs for a filter are as follows:
  
Filters are scheduled for production only after orders are received, and are shipped immediately upon completion. This results in product costs being charged directly to cost of goods sold. In December, 3,000 filters were produced and shipped. Materials were purchased at a cost of $8,450 and actual conversion costs of $13,650 were recorded.
Required:
Prepare journal entries to record December's costs for the production of the filters.

Accepted Answer

The answer of Corry Corporation manufactures filters for cars, vans,...

Question 17

Which of the following statements best defines a trigger point in a sequential-tracking costing system?
A) the inventory level at which a new purchase order is generated
B) the point at which the sum of annual relevant stockout and ordering costs is minimal
C) the production level at which the costing system becomes incapable of tracking the production costs
D) a stage in the production cycle at which journal entries are made in the accounting system

Accepted Answer

A trigger point in a sequential-tracking costing system refers to a specific stage in the production cycle where journal entries are recorded in the accounting system to reflect the costs incurred.

Question 18

Vision Enterprises manufactures converter boxes for high definition TVs. All processing is initiated when an order is received. For March there were no beginning inventories. Conversion Costs and Direct Materials are the only manufacturing cost accounts. Direct Materials are purchased under a just-in-time system. Backflush costing is used with a finished goods trigger point. Additional information is as follows:
  
Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.

Accepted Answer

The answer of Vision Enterprises manufactures converter boxes for high...

Question 19

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 would be recorded when units are sold for the month under backflush costing? Please round intermediate calculations to two decimal places (i.e., unit costs)

A) 
B) 
C)
D)

Accepted Answer

11ea1398_f0ee_5869_a1e4_87c8c540b671_TB3027_00

Question 20

Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers totally different to what a sequential costing approach would report.

Accepted Answer

Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers similar to what a sequential costing approach would report.

Quiz 20: Inventory Management, Just-in-Time, and Simplified Costing Methods

To comply with GAAP, backflush cost numbers can be adjusted by recording a journal entry.

A positive aspect of backflush costing is the presence of the visible audit trail.

The journal entry to dispose of the difference between actual conversion costs incurred and standard conversion costs allocated is different under backflush costing and sequential tracking.

A firm using a backflush costing system will always use actual costs rather than standard costs.

Which of the following statements is true of a backflush costing system?

Companies that utilize backflush costing typically prorate underallocated or overallocated conversion costs between work-in-process, finished goods, and cost of goods sold.

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Under backflush costing approach where three trigger points are used (stage A, stage C, and stage D) , the purchase of materials is:

In a backflush-costing system, no record of work in process appears in the accounting records.

Which of the following statements best defines a trigger point in a sequential-tracking costing system?

Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers totally different to what a sequential costing approach would report.