Question

1. Nate Company manufactures Products A and B from a joint process that also yields a by-product, X. Nate Company accounts for the revenue from its by-product sales as a deduction from the cost of its main products. Additional information is as follows

	Product
	A	B	X	Total
Units produced	15,000	9,000	6,000	30,000
Joint costs	?	?	?	$200,000
Sales value at split off	$392,000	$168,000	$20,000	$580,000

(1) Assuming that joint product costs are allocated using the relative sales value at split-off approach, what was the joint cost allocated to Products A and B?

(2) Prepare the journal entry to transfer the finished products (Products A and B) to separate inventory accounts.

(3) Assuming the sales value of X is stable, prepare the journal entries to:

      (a) place the by-product in stock

      (b) record the sale of 3,000 units for $11,500 on account.

ANS:

(1)

(2)

  

       

(3)  

(a)

(b)       

Answer 1

Question 1
		A	B	X	Total
A	Sales Value at splitoff	$    3,92,000.00	$ 1,68,000.00	$      20,000.00
B	Joint Cost				$ 2,00,000.00
C	Joint Cost to be allocated				$ 1,80,000.00
D	Joint cost allocation on the basis of value of splitoff	$    1,26,000.00	$      54,000.00	$                     -	$ 1,80,000.00

Question 2

Finished Goods A $126,000

Finished Goods B $54,000

Work-in-process inventory $180,000

Question 3a

Finished Goods $120,000

Work in process inventory $120,000

Question 3b

Accounts recivable $11,500

Cost of goods sold $11,500

Inventory $11,500

Sales $11,500