Question

Blueberry company is a trading company. Due to certain incident, some of the inventory is damaged and needs to be repackaged. The cost of repackaging was $ 50,000 to enable the inventory to be sold at $ 1,100,000. The cost for the batch is $1,000,000

How should Blueberry company treat the cost of repackaging? (is it an expense or included in Cost of Goods Sold)? Also prepare the journal entries!

Answer 1

Blueberry company should the cost of repackaging in Cost of Goods Sold because the repackaging cost is the direct cost incurred for the production of products.Repackaging cost is an integral part of product, so it is included in the cost of goods sold. Repackaging cost is not an expenses

Journal entries are as follows:

Date	Account and Explanation	Debit($)	Credit($)
1)	Account Receivable	1,100,000
	Sale		1,100,000
	(Recorded the sale of goods on account)
2)	Cost of Goods Sold ($1,000,000 + $50,000)	1,050,000
	Inventory		1,050,000
	(Recorded the cost of goods sold)