84 terms

Cost Accounting Chapter 16

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What type of cost is the result of an event that results in more than one product or service simultaneously?
A) byproduct cost
B) joint cost
C) main cost
D) separable cost
B
Which of the following statements best define splitoff point in joint costing?
A) It is the point at which managers decide to discontinue one or more of the products.
B) It is the point at which the managers decide to outsource some of its production processes.
C) It is the juncture in a joint production process when two or more products become separately identifiable.
D) It is the juncture at which decisions determining joint costs of various products to be produced are taken.
C
Which of the following statements is true of joint production process and its components?
A) Distribution costs incurred beyond the split off point assignable to each of the specific products identified at the split off point are considered as joint costs.
B) Decisions relating to the sale or further processing of each identifiable product can be made independently of decisions about the other products beyond the split off point.
C) When a joint production process yields two or more products with low total sales values relative to the total sales values of other products, those products are called joint products.
D) The primary purpose of joint costing is to allocate the separable costs to the individual products that are eventually sold.
B
The focus of joint costing is on allocating costs to individual products ________.
A) before the split off point
B) after the split off point
C) at the split off point
D) at the end of production
C
Which of the following statements is true of joint costing?
A) The costs of a production process that yields multiple products simultaneously are called joint costs.
B) Distribution costs incurred beyond the split off point that are assignable to each of the specific products identified at the split off point are considered as joint costs.
C) The primary purpose of joint costing is to allocate the separable costs to the individual products that are eventually sold.
D) Joint costing is less useful for companies which manufacture multiple products simultaneously from the same production process.
A
When a single manufacturing process yields two products, one of which has a relatively high sales value compared to the other, the two products are respectively known as ________.
A) joint products and byproducts
B) joint products and scrap
C) main products and byproducts
D) main products and joint products
C
Which of the following statements best define joint products?
A) When one product has a high total sales value compared with the total sales value of other products of the process, that product is called a joint product.
B) Product of a joint production process that have the same sales value compared with the total sales value of the by products is called a joint product.
C) When one product has a low total sales value compared with the total sales value of other products of the process, that product is called a joint product.
D) When a joint production process yields two or more products with high total sales values relative to the total sales values of other products, those products are called joint products.
D
The products of a joint production process that have low total sales values compared with the total sales value of the main product are called ________.
A) primary products
B) joint products
C) byproducts
D) waste products
C
________ is the differentiating factor while classifying a product as a main product or byproduct.
A) Number of units per processing period
B) Weight or volume of outputs per period
C) Percentage of total sales value
D) Joint costs incurred up to the split off point
C
In joint costing, which of the following changes may lead to a change in product classification?
A) main product sales price increases due to a new application
B) byproduct sales price decreases due to a new government regulation
C) main product becomes technologically obsolete
D) byproduct loses its market due to a new invention
C
Products with a relatively low sales value are known as ________.
A) primary products
B) main products
C) joint products
D) byproducts
D
Which of the following statements is true of main products and byproducts?
A) A byproduct will never become a main product.
B) A main product will never become a byproduct.
C) Product classifications may change over time.
D) Product classifications remains constant over time.
C
Outputs with a negative sales value are ________.
A) added to cost of goods sold
B) added to joint production costs and allocated to joint or main products
C) added to joint production costs and allocated to byproducts and scrap
D) subtracted from product revenue
B
Which of the following is a possible reason to allocate joint costs to individual products?
A) rate regulation requirements
B) to prepare financial statements
C) for product design decisions
D) to determine tax rates
A
A business which enters into a contract to purchase a product which compensates the manufacturer under a cost reimbursement agreement should take an active part in the determination of how joint costs are allocated because ________.
A) the manufacturer may allocate a large portion of its other costs to these products
B) the business need those information for its tax reporting purposes
C) the FASB requires the business to participate in the cost allocation process
D) it is an opportunity for the business to enhance its market knowledge
A
Which of the following statements is true of the methods for allocating joint costs?
A) Constant gross-margin percentage method results in same joint production cost per unit for all products.
B) Estimated net realizable value method results in same gross margin percentage for all products.
C) Present value allocation method is the least preferred method due to its complex calculations.
D) Sales value at split off method uses the sales value of the entire production of the accounting period to allocate costs.
D
An example of allocating joint costs using physical measures is allocating joint costs based on ________.
A) sales value at split off point
B) volume of the products
C) constant gross-margin percentage
D) net realizable value
B
In joint costing, which of the following is a market-based approach to allocating costs?
A) sales units
B) units of production
C) physical measures
D) net realizable value
D
The sales value at splitoff method ________.
A) allocates joint costs to joint products on the basis of the relative total sales value at the split off point
B) allocates joint costs to joint products on the basis of a comparable physical measure at the split off point
C) allocates joint costs to joint products on the basis of relative NRV
D) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage
A
Which of the following statements is true of the methods for allocating joint costs?
A) The net realizable value method uses the sales value of the units sold during the accounting period to allocate joint costs.
B) The sales value at split off method always results in the same gross-margin percentage for all products.
C) The sales value at split off method allocates joint costs to each product in proportion to the sales value of total production.
D) The net realizable value method results in the same joint production cost per unit for all products.
C
The physical-measure method ________.
A) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage
B) allocates joint costs to joint products on the basis of a comparable physical measure at the split off point
C) allocates joint costs to joint products on the basis of the relative sales value at the split off point
D) allocates joint costs to joint products on the basis of relative NRV
B
The net realizable value method ________.
A) allocates joint costs to joint products on the basis of a comparable physical measure at the split off point
B) allocates joint costs to joint products on the basis of the relative sales value at the split off point
C) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage
D) allocates joint costs to joint products on the basis of relative NRV
D
Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products?
A) A high individual product value results in a high level of joint costs.
B) A low individual product value results in a low level of joint costs.
C) A high individual product value results in a low level of joint costs.
D) There is no cause-and-effect relationship.
D
The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ________.
A) physical measures such as quantity are clear bases for allocating cost than other measures
B) physical measures are more difficult to calculate
C) revenues are usually the best indicators of the benefits received
D) revenues always remain consistent over short-run
C
Bismite Corporation purchases trees from Cheney lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October:

Trees processed: 250 trees
Production: paper 180,000 sheets
pencil casings 180,000
Sales: paper 174,000 at $0.12 per page
pencil casings 178,500 at $0.15 per casing

The cost of purchasing 250 trees and processing them up to the split off point to yield 180,000 sheets of paper and 180,000 pencil casings is $12,500.
Bismite's accounting department reported no beginning inventory.

What is the total sales value at the split off point for paper?
A) $26,775
B) $20,880
C) $21,600
D) $27,000
C
What is the total sales value at the splitoff point of the pencil casings?
A) $21,600
B) $27,000
C) $26,775
D) $20,880
B
What are the paper's and the pencil's approximate weighted cost proportions using the sales value at
split off method, respectively?
A) 50.00% and 50.00%
B) 33.33% and 66.67%
C) 31.82% and 68.18%
D) 44.44% and 55.56%
D
If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?
A) $185.17
B) $57.87
C) $175.38
D) $57.78
A
If the sales value at splitoff method is used, what is the approximate production cost for each pencil
casing?
A) $0.309
B) $0.301
C) $0.031
D) $0.039
D
If the sales value at splitoff method is used, what is the approximate production cost for each paper sheet?
A) $0.309
B) $0.301
C) $0.031
D) $0.039
C
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June production is 5,000 widgets; 8,750 gizmos; and 10,000 turnbols. Respective per unit selling prices at split off are $75, $50, and $25. Joint costs up to the split off point are $187,500.

If joint costs are allocated based upon the sales value at split off, what amount of joint costs will be allocated to the widgets?
A) $30,882
B) $66,176
C) $44,118
D) $77,206
B
What amount of joint costs will be allocated to the Turnbols?
A) $44,118
B) $30,882
C) $77,206
D) $66,176
A
What amount of joint costs will be allocated to the Gizmos?
A) $44,118
B) $30,882
C) $77,206
D) $66,176
C
A reason why a physical-measure to allocate joint costs is less preferred than the sales value at split off is because ________.
A) a physical measure such as volume is difficult to estimate than sales value
B) physical volume usually has little relationship to the revenue producing power of products
C) a physical measure usually results in less costs being allocated to the product that weighs the most
D) customers will easily understand that the products are overpriced
B
The Alfarm Corporation processes raw milk up to the splitoff point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February:

Direct materials processed: 750,000 gallons (727,500 gallons of good product)
Production: Cream 442,500 gallons
Liquid skim 285,000 gallons
Sales: Cream 421,500 at $110 per gallon
Liquid skim 273,000 at $100 per gallon

The cost of purchasing 750,000 gallons of direct materials and processing it up to the split off point to yield a total of 727,500 gallons of good product was $2,280,000.

What are the physical-volume proportions to allocate joint costs for cream and liquid skim, respectively?
A) 59.00% and 41.00%
B) 60.82% and 39.18%
C) 50.00% and 50.00%
D) 59.79% and 40.21%
B
When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated to cream and liquid skim?
A) $1,386,804 and $893,196
B) $1,140,000 and $1,140,000
C) $1,368,000 and $912,000
D) $1,254,00 and $1,026,000
A
When using the physical-volume method, what is Cream's approximate production cost per gallon?
A) $3.03
B) $3.31
C) $3.13
D) $3.21
C
Which of the following statements about Alfarm's joint production costs is true?
A) The gross-margin percentage per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons.
B) The gross-margin percentage per gallon of Cream is higher than gross margin percentage per gallon of Liquid skim because of Cream's higher production volume.
C) The joint production cost per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons.
D) The joint production cost per gallon of Cream is higher than joint production cost per gallon of Liquid skim because of Cream's higher production volume.
C
Answer the following questions using the information below:

Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types of memory chips, Standard and Premium. The following information was collected for last quarter of the calendar year:

Direct materials processed: 200 kgs (Both standard and premium chips weigh 10 grams each)
Production: Standard 10,000 chips
Premium 6,500 chips
Sales: Standard 9,500 at $100 per chip
Premium 6,000 at $170 per chip

The cost of purchasing 200 kgs of direct materials and processing it up to the split off point to yield a total of 16,500 chips of good products was $1,950,000.
Beginning inventories totaled 100 chips for Standard and 50 chips for Premium. Ending inventory amounts reflected 100 chips of Standard and 50 chips of Premium. October costs per unit were the same as November.

What are the physical-volume proportions for products Standard and Premium, respectively?
A) 60.00% and 40.00%
B) 55.00% and 45.00%
C) 60.61% and 39.39%
D) 54.00% and 46.00%
C
When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated Standard chips?
A) $1,170,000
B) $1,818,818
C) $975,000
D) $1,181,818
D
When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated Premium chips?
A) $768,182
B) $1,170,000
C) $975,000
D) $780,000
A
The Green Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October:

Direct Materials processed: 98,000 gallons (after shrinkage)
Production: Condensed goat milk 42,500 gallons
Skim goat milk 55,500 gallons
Sales: Condensed goat milk $3.50 per gallon
Skim goat milk $2.50 per gallon

The costs of purchasing the of unprocessed goat milk and processing it up to the split off point to yield a total of 98,000 gallons of saleable product was $184,480. There were no inventory balances of either product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4 per usable gallon. Xyla can be sold for $20 per gallon.

Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $4. The product can be sold for $9 per gallon.
There are no beginning and ending inventory balances.

What is the estimated net realizable value of Xyla at the split off point?
A) $271,000
B) $287,400
C) $672,000
D) $712,600
C
What is the estimated net realizable value of the skim goat ice cream at the splitoff point?
A) $271,000
B) $287,400
C) $672,000
D) $712,600
A
What is the estimated net realizable value of the skim goat ice cream at the splitoff point?
A) $271,000
B) $287,400
C) $672,000
D) $712,600
B
Using the sales value at splitoff method, what is the gross-margin percentage for condensed goat milk at the splitoff point?
A) 51.74%
B) 50.00%
C) 35.83%
D) 48.26%
C
Using the sales value at splitoff method, what is the gross-margin percentage for skim goat milk at the split off point?
A) 51.74%
B) 50.00%
C) 35.83%
D) 48.26%
C
How much (if any) extra income would Green earn if it produced and sold all of the Xyla from the condensed goat milk? Allocate joint processing costs based upon relative sales value on the split off. (Extra income means income in excess of what Green would have earned from selling condensed goat milk.)
A) $576,552
B) $132,250
C) $523,250
D) $181,968
C
How much (if any) extra income would Green earn if it produced and sold skim milk ice cream from goats rather than goat skim milk? Allocate joint processing costs based upon the relative sales value at the split off point.
A) $132,250
B) $576,552
C) $523,250
D) $181,968
A
Chem Manufacturing Company processes direct materials up to the splitoff point where two products (X and Y) are obtained and sold. The following information was collected for the month of November:

Direct materials processed: 10,000 gallons (10,000 gallons yield 9,500 gallons of good product and 500 gallons of shrinkage)

Production: X 5,000 gallons
Y 4,500 gallons

Sales: X 4,750 at $150 per gallon
Y 4,000 at $100 per gallon

The cost of purchasing 10,000 gallons of direct materials and processing it up to the split off point to yield a total of 9,500 gallons of good products was $975,000.

The beginning inventories totaled 50 gallons for X and 25 gallons for Y. Ending inventory amounts reflected 300 gallons of Product X and 525 gallons of Product Y. October costs per unit were the same as November.

Using the physical-volume method, what is Product X's approximate gross-margin percentage?
A) 32%
B) 34%
C) 35%
D) 38%
A
Beverage Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July:

Direct materials processed: 2,500 liters (with 20% shrinkage)

Production: A 1,500 liters
B 500 liters

Sales: A $15.00 per liter
B $10.00 per liter

The cost of purchasing 2,500 liters of direct materials and processing it up to the split off point to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances of A and B.

Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters.

Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters.

If Product Z5 and Product W3 are produced, what are the expected sales values of production, respectively?
A) $11,250 and $34,375
B) $22,500 and $ 5,000
C) $31,250 and $10,500
D) $34,375 and $11,250
D
Cola Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July:

Direct materials processed: 2,500 liters (with 20% shrinkage)

Production: A 1,500 liters
B 500 liters

Sales: A $15.00 per liter
B $10.00 per liter

The cost of purchasing 2,500 liters of direct materials and processing it up to the split off point to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances of A and B.

Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters.

Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters.

What is Product Z5's estimated net realizable value at the split off point?
A) $11,100
B) $22,350
C) $34,225
D) $34,375
C
Which of the following is true of the physical-measure approach of allocating joint costs?
A) Costs cannot be allocated if the measurement basis for each product are different.
B) Physical measures usually result in less costs being allocated to the product that weighs the most.
C) The physical measure reflects a product's ability to generate revenues.
D) Obtaining comparable physical measures for all products is always straightforward.
A
The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:
Direct Materials processed: 18,000 gallons (after shrinkage)

Production: Butter Cream 7,500 gallons
Condensed Milk 10,500 gallons
Sales: Butter Cream 7,000 gallons
Condensed Milk 10,000 gallons
Sales Price: Butter Cream $3.5 per gallon
Condensed Milk $7.5 per gallon
Separable costs in total: Butter Cream $12,500
Condensed Milk $34,700

The cost of purchasing the of unprocessed milk and processing it up to the split off point to yield a total of 18000 gallons of saleable product was $46,000.

The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.

What is the constant gross-margin percent for Kenton?
A) 10%
B) 6.3%
C) 11%
D) 6.5%
C
What is the allocated joint costs of Condensed Milk?
A) $35,200
B) $10,800
C) $12,500
D) $34,700
A
What is the allocated joint costs of Butter Cream?
A) $35,200
B) $12,500
C) $34,700
D) $10,800
D
Which of the following statements is true of Kenton's joint cost allocations?
A) The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the split off point.
B) One product can receive negative joint costs allocations to bring the other unprofitable product to the overall average gross margin.
C) Kenton has chosen the easiest method for allocating its joint costs of production.
D) The gross profit percent of condensed milk is lower than the gross profit of butter cream.
B
Which of the methods of allocating joint costs usually is considered the simplest to implement?
A) estimated net realizable value
B) constant gross-margin percentage NRV
C) sales value at split off
D) physical measures
C
Which of the following statements is true of the methods for allocating joint costs?
A) Under the cause-and-effect criterion, the physical-measure method is highly desirable.
B) Byproducts are never excluded from the denominator used in the physical-measure method.
C) The NRV method is never used when the selling prices of joint products vary frequently.
D) The sales value at split off method follows the benefits-received criterion of cost allocation
D
The Brital Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:
Direct Materials processed: 28,000 gallons

Production: Butter Cream 12,500 gallons
Condensed Milk 15,500 gallons
Sales: Butter Cream 12,000 gallons
Condensed Milk 15,000 gallons
Sales: Butter Cream $2.5 per gallon
Condensed Milk $5.5 per gallon
Separable costs in total: Butter Cream $13,500
Condensed Milk $33,700

The costs of purchasing the of unprocessed milk and processing it up to the split off point to yield a total of 28,000 gallons of saleable product was $46,000.

The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.

What is the constant gross margin percent for Brital?
A) 15%
B) 22%
C) 20%
D) 30%
C
What is the allocated joint costs of Butter Cream?
A) $33,700
B) $13,500
C) $34,500
D) $11,500
D
What is the allocated joint costs of Condensed Milk?
A) $34,500
B) $13,500
C) $33,700
D) $11,500
A
Which of the following statements is true of Brital?
A) The gross profit percent of condensed milk is lower than the gross profit of butter cream.
B) The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the split off point.
C) The gross profit of condensed milk is lower than the gross profit of butter cream.
D) The gross margin is allocated to the joint products in order to determine the joint-cost allocations.
D
If separable costs of Butter Cream was 16,000 and constant gross margin was 25%, what would have been the allocated joint costs of Condensed Milk?
A) $7,438
B) $7,538
C) $30,238
D) $30,338
C
If separable costs of Butter Cream was 16,000 and constant gross margin was 25%, what would have been the total allocated joint costs of production?
A) $37,675
B) $33,700
C) $30,238
D) $34,500
A
Why do accountants criticize the practice of carrying inventories at estimated net realizable values?
A) The costs of producing the products are usually estimates.
B) There is usually no clearly defined realizable value for any inventories.
C) In effect, this practice recognizes income before sales are made.
D) It will result in higher cost of goods sold and lesser profits.
C
The constant gross-margin percentage NRV method of joint cost allocation ________.
A) involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years
B) computes gross margin before allocating the costs to the products
C) is the same as the estimated NRV method
D) is the same as the sales-value at split off method
B
In joint costing, the sales value at splitoff method is used frequently ________.
A) in a dynamic business environment where the selling prices change frequently
B) in anticipation of subsequent management decisions
C) when selling prices are dependent on further processing decisions
D) since the selling-price data exists at the split off
D
When the selling prices of all products at the splitoff point are unavailable, the ________ is the best alternative for allocating joint costs.
A) sales value at split off method
B) NRV method
C) physical measures method
D) constant gross-margin percentage method
B
Which of the following statements is true of the methods for allocating joint costs?
A) The sales value at split off method lacks a common basis for allocating joint costs to products.
B) The complexity of the sales value at split off method increases when managers make frequent changes to the sequence of post-split off processing decisions.
C) The NRV method assumes that none of the markup is attributable to the separable costs.
D) The NRV method treats the joint products as though they comprise a single product.
C
The drawback of the constant gross-margin percentage NRV method in joint costing is that ________.
A) it recognizes that profits are derived from the costs incurred after split off
B) it assumes the profit margin to be identical across all products
C) it attempts to approximate the sales values at split off by subtracting from final selling prices the separable costs incurred after the split off point
D) it ignores the separable costs of further processing
B
In joint costing, the ________ assumes that all the markup is attributable to the joint process costs.
A) sales value at split off method
B) NRV method
C) constant gross-margin percentage method
D) physical measures method
B
When a product is the result of a joint process, the decision to process the product past the split off point further should be influenced by the ________.
A) total amount of the joint costs
B) portion of the joint costs allocated to the individual products
C) extra revenue earned past the split off point
D) extra operating income earned past the split off point
D
In joint costing, the potential conflict between cost concepts used for decision making and cost concepts used for evaluating the performance of managers will be most severe when the ________ method is used.
A) sales value at split off
B) physical measure
C) constant gross-margin percentage NRV
D) estimated NRV
B
Which of the following statements is true of sell-or-process-further decisions in joint costing?
A) Joint costs incurred before the split off point are relevant in deciding whether to process the product further.
B) All separable costs in joint-cost allocations are incremental costs.
C) Separable costs incurred before the split off point are irrelevant in deciding whether to process the product further.
D) Costs that differ between the alternatives of selling products or processing further are relevant.
D
What factor most often drives joint cost allocation?
A) performance evaluation
B) manager compensation
C) selling prices
D) simplicity of the method
C
Which method of accounting recognizes byproducts in the financial statements at the time their production is completed?
A) gross margin method
B) sales method
C) production method
D) market value method
C
Torid Company processes 17,500 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for $5 per gallon and Product Y, the main product, sells for $150 per gallon. The following information is for December:
Beginning Ending
Production Sales Inventory Inventory
Product X: 5,375 5,300 0 75
Product Y: 9,975 9,990 25 10

The manufacturing costs totaled $25,000.

Under production method, Product X NRV would be offset against the costs of Product Y by ________.
A) $26,500
B) $26,875
C) $50,000
D) $48,125
B
How much is the ending inventory for the byproduct if byproducts are recognized in the general ledger at the point of sale?
A) $0
B) $375
C) $1,500
D) $2,500
A
The production method will report Product X in the balance sheet at ________.
A) $0
B) $1,500
C) $375
D) $2,500
C
If the byproduct inventory is recorded at NRV less profit margin of 20%, the balance sheet will report ________ of byproduct inventory.
A) $375
B) $0
C) $1,500
D) $300
D
A negative consequence of recording byproducts in the accounting records when the sale occurs is that ________.
A) the revenue from the byproducts is usually fairly large and the accounting records will be distorted
B) earnings cannot be timed under this method
C) managers can be tempted to stockpile byproducts
D) it involves complex calculations compared to the production method
C
Which of the following statements is true of the production method of accounting for byproducts?
A) It makes no journal entries until the byproduct is sold.
B) It is the preferred method because of the matching principle.
C) It records revenues of the byproduct in the income statement as revenue.
D) It adds revenues of the byproduct to the cost of goods sold in the income statement.
B
Which of the following statements is true of the sales method of accounting for byproducts?
A) It makes journal entries when the byproducts are produced.
B) It is the preferred method because of the matching principle.
C) It allows a firm to manage its reported earnings by timing the sale of byproducts.
D) This method recognizes the byproduct inventory in the accounting period in which it is produced.
C
Which of the following journal entries can happen only under the production method of recording byproducts?
A) Work in Process
Finished Goods - Byproduct
Accounts Payable
B) Cash or Accounts Receivable
Revenues - Main product
C) Byproduct Inventory
Finished Goods - Main product
Work in Process
D) Cash or Accounts Receivable
Revenues - Byproduct
C
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