Grant Foundry Inc. manufactures custom metal products that require casting, such as engine blocks, pistons, and engine housings. During the current period an order for 5,000 custom housings was begun as Job 3387 for Raton Pump Company. After the job was completed, the housings were inspected and 200 units were determined to be defective. The customer has agreed to accept the order with only 4,800 units instead of the quantity originally ordered. The spoiled units can be sold as seconds for $15 each. Spoiled goods are kept in an inventory account separate from Finished Goods. Total costs charged to Job 3387 are:
Materials .................................................... $46,000
Labor (1,000 hours x $14 per hour) ..................... 14,000
Factory overhead ($30 per labor hour) ................. 30,000
Total cost charged to Job 3387 ........................... $90,000
Custom jobs are priced at 140 percent of cost. The unrecoverable cost of spoilage is charged to Factory Overhead Control when it results from internal failure.
Required:
(1) Assuming the defective units are the result of internal failure, prepare the general journal entry to record the transfer of defective units to Spoiled Goods Inventory and the shipment of Job 3387 to the customer.
(2) Assuming the defective units are the result of a change in design specified by the customer after the units were completed, prepare the general journal entry to record the transfer of defective units to Spoiled Goods Inventory and the shipment of Job 3387 to the customer.