Chapter 6, Problem 16E

Espana Co. makes one main product, Uno, and a by-product, Dos, which splits off from the main product when the work is three-fourths completed. Dos is sold without further processing and without being placed in stock. During June, $1,200 is realized from the sale of the by-product.

Make the entries to record the recovery and sale of the by-product, on account, on the assumption that the recovery is treated as one of the following:

1. a. A reduction in the cost of the main product
2. b. Other income