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    Advanced Financial Accounting and Reporting (CPALE Review)

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    Micko Lagundino
    The document describes backflush costing, which is an inventory costing method where inventory and cost of goods sold accounts are adjusted at the end of each period based on a physical count of inventory. Conversion costs are expensed to cost of goods sold rather than being added to inventory. Under backflush costing, raw material costs are "backflushed" from raw materials inventory to finished goods or cost of goods sold based on the information provided.

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    Advanced Financial Accounting and Reporting (CPALE Review)

    Uploaded by

    Micko Lagundino
    871 views3 pages
    The document describes backflush costing, which is an inventory costing method where inventory and cost of goods sold accounts are adjusted at the end of each period based on a physical count of inventory. Conversion costs are expensed to cost of goods sold rather than being added to inventory. Under backflush costing, raw material costs are "backflushed" from raw materials inventory to finished goods or cost of goods sold based on the information provided.

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    The document describes backflush costing, which is an inventory costing method where inventory and cost of goods sold accounts are adjusted at the end of each period based on a physical count of inventory. Conversion costs are expensed to cost of goods sold rather than being added to inventory. Under backflush costing, raw material costs are "backflushed" from raw materials inventory to finished goods or cost of goods sold based on the information provided.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    871 views3 pages

    Advanced Financial Accounting and Reporting (CPALE Review)

    Uploaded by

    Micko Lagundino
    The document describes backflush costing, which is an inventory costing method where inventory and cost of goods sold accounts are adjusted at the end of each period based on a physical count of inventory. Conversion costs are expensed to cost of goods sold rather than being added to inventory. Under backflush costing, raw material costs are "backflushed" from raw materials inventory to finished goods or cost of goods sold based on the information provided.

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    From Advanced Financial Accounting and Reporting Book (CPALE Review)

    Backflush Costing

    The Backflushers Manufacturing Corp. uses a Raw and In Process


    inventory account and expenses all conversion costs to the cost of
    goods sold account. At the end of the month, all inventories are
    counted, their conversion cost components are estimated, and
    inventory account balances are adjusted accordingly. Raw material
    cost is backflushed from RIP to finished goods. The following
    information is for the month of May:
    Raw and In Process inventory account, May 1,
    including P500 of conversion cost 5,000
    Raw materials received during May (50% down,
    balance four installments) 100,000
    Raw and In Process inventory account, May 31,
    including P650 of estimated conversion cost 5,250
    What is the amount to be backflushed from RIP to finished goods?

    The Backflushers Manufacturing Corp. uses a Raw and In Process


    inventory account and expenses all conversion costs to the cost of
    goods sold account. At the end of each month, all inventories are
    counted, their conversion cost components are estimated, and
    inventory account balances are adjusted accordingly. Raw material
    cost is backflushed from RIP to finished goods. The following
    information is for the month of May:
    Raw and In Process inventory account, May 1,
    including P500 of conversion cost 5,000
    Finished goods inventory, May 1, including
    P3,250 of conversion cost 11,250
    Raw materials received during May (50% down,
    balance in four installments) 100,000
    Raw and In Process inventory account, May 31,
    including P650 of estimated conversion cost 5,250
    Finished goods inventory account, May 31, including
    P2,500 conversion cost estimate 7,500
    What is the amount to be backflushed from RIP to cost of goods sold?
    What is the balance of cost of goods sold after adjustment?
    The Cleaners Manufacturing Corp. uses a Raw and In Process (RIP)
    inventory account and expensed all conversion costs to cost of goods sold
    account. At the end of each month, all inventories are counted, their
    conversion cost components are estimated, and inventory account
    balances are adjusted accordingly. Raw material cost is backflushed from
    RIP to finished goods. The following information is for May:
    Raw and In Process, May 1 38,700
    Raw and In Process, May 31 41,900
    Raw materials purchased 680,000
    Conversion costs incurred 4,800
    Conversion costs allocated 5,300
    Finished goods, May 1 12,000
    Finished goods, May 31 10,000
    What is the calculated material cost to be backflushed from RIP to COGS?
    What is the amount of conversion costs to be backflushed to COGS?

    An entity is employing backflush costing in connection with just-in-time


    production process. The production data for the year is provided below:
     The entity acquired direct materials during the year at a cost of P100,000.
     The entity reported direct labor cost of P200,000.
     The actual factory overhead incurred during the year amounted to P170,000.
     The standard factory overhead application rate is 75% of direct labor cost.
     The ending finished goods inventory is reported at P120,000.
    What is the cost of goods sold to be reported by the entity under backflush
    costing?

    A company has a life cycle of 3 days, uses a Raw and In Process


    Account (RIP) and charges all conversion costs to cost of goods sold.
    At the end of each month, all inventories are counted, their
    conversion costs components are estimated, and inventory account
    balances are adjusted. Raw material cost is backflushed from Raw and
    In Process Account to finished goods. The following information is
    provided for the month of June.
    Beginning balance, Raw and In Process account,
    Including P1,000 of conversion cost 5,000
    Beginning balance, finished goods account, including
    P6,000 of conversion cost 10,000
    Raw materials received on credit 400,000
    Direct labor cost 300,000; Factory overhead 500,000 800,000
    Ending balance, Raw and In Process inventory per
    physical count, including P7,000 conversion cost 20,000
    Ending balance, finished goods inventory per physical
    count, including P4,000 conversion cost 6,000
    What is the amount of conversion cost in units sold in June?
    What is the amount of direct materials backflushed from RIP to FG?
    What is the amount of direct materials backflushed from FG to COGS?

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