Q2 Carpets N More produces carpet for commercial use. In the process of creating the carpet and sizing it for its customers, a by-product is created. These scraps are sold to other companies to be used in small projects such as dog houses or decorative designs. The revenue of these scraps is minimal compared to the overall sales of the company. The joint process to create both products is $65,000. The carpet produces 16,000 yards at $15 per yard. The scraps produce 3,000 yards and are sold at $1 per yard. Both products are sold at split-off and not processed further. Instructions a. If the companies use the production method to account for the by-product, record the journal entries for the following transactions: 1. The completion of all products. (carpet and scrap) 2. The sale of the carpet, assuming all yards produced were sold. 3. The sale of the scraps, assuming all yards produced were sold. b. Repeat the steps of part a, if the company accounts for by-products using the sales method. c. If 15% of the production for both products is unsold at year-end, how much inventory cost would remain on the balance sheet under the (1) production method, (2) sales method?

Q2 Carpets N More produces carpet for commercial use. In the process of creating the carpet and sizing it for its customers, a by-product is created. These scraps are sold to other companies to be used in small projects such as dog houses or decorative designs. The revenue of these scraps is minimal compared to the overall sales of the company. The joint process to create both products is $65,000. The carpet produces 16,000 yards at $15 per yard. The scraps produce 3,000 yards and are sold at $1 per yard. Both products are sold at split-off and not processed further. Instructions a. If the companies use the production method to account for the by-product, record the journal entries for the following transactions: 1. The completion of all products. (carpet and scrap) 2. The sale of the carpet, assuming all yards produced were sold. 3. The sale of the scraps, assuming all yards produced were sold. b. Repeat the steps of part a, if the company accounts for by-products using the sales method. c. If 15% of the production for both products is unsold at year-end, how much inventory cost would remain on the balance sheet under the (1) production method, (2) sales method?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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