Question

Nate Company manufactures Products A and B from a joint process that also yields a by-product,...

  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)       

Homework Answers

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

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