Question

During the month 100,000 pounds of materials were processed. Of this, 90,000 of main product were...

During the month 100,000 pounds of materials were processed. Of this, 90,000 of main product were transferred to the next department, and 10,000 pounds of by-product were recovered. The by product can be sold for .02 per pound.

What is the journal entry to account for the by-product if they treat the market value of the byproduct as misc. income?

Date

Account

Debit

Credit

1/31/xx

What is the journal entry if they treat the market value of the by-product as a reduction to the work in process of the current department (Mixing)?

Date

Account

Debit

Credit

1/31/xx

What is the cost per unit of the main product if they treat the market value of the byproduct as misc. income? _____________________

What is the cost per unit of the main product if they treat the market value of the by-product as a reduction to the work in process of the current department (Mixing) ________________________

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Answer #1
Date Account titles and explanation Debit   Credit  
31/1/XXX Accounts receivable / Bank    200
Miscellaneous income      200
10000 pounds * $ 0.02 per pound
Accounting of sale of by products as Miscellaneous Income
31/1/XXX Accounts receivable / Bank
Work in process inventory      200
10000 pounds * $ 0.02 per pound
Accounting of sale of by products as a reduction to work in process
Scenario Cost of the main product
When sale of By products is miscellaneous income Inflated and includes the By products. No specific costs is attached to the by products
When sale of By products is a reduction to WIP stock The market value changes of the by product will change the costs of the main product.
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