Illustrative Problem: SPOILED GOODSThe GRAND CABINET COMPANY manufactures custom cabinets for homebuilders. Duringthe current period, an order for 3,500 was begun as Job No. 2-54. Unit cost is as follows:Direct materialsDirect laborFactory overhead (includes P1.00 allowance forspoiled units)TotalP 19.6017.202) If loss is special (specific order).14.80P 51.60When the job was completed, 200 units were rejected and sold for P15.60 each. A separatework in process account is used for each cost element.Required: Journal entries under each of the following:T1) If loss is due to internal failure (total production).

There are two kinds of losses, loss and abnormal loss. Normal losses are charges in the ordinary…

Answered: Required: Journal entries under each of…

Required: Journal entries under each of the following: 1) If loss is due to internal failure (total production). 2) If loss is special (specific order).

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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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

Illustrative Problem: SPOILED GOODS
The GRAND CABINET COMPANY manufactures custom cabinets for homebuilders. During
the current period, an order for 3,500 was begun as Job No. 2-54. Unit cost is as follows:
Direct materials
Direct labor
Factory overhead (includes P1.00 allowance for
spoiled units)
Total
P 19.60
17.20
2) If loss is special (specific order).
14.80
P 51.60
When the job was completed, 200 units were rejected and sold for P15.60 each. A separate
work in process account is used for each cost element.
Required: Journal entries under each of the following:
T
1) If loss is due to internal failure (total production).

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Accounting for Current liabilities, Provisions and Contingencies

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