Mae- Doff Designs uses a job order costing system to account for the various architectural services offered to commercial clients. For each major job, architectural models of the completed structures are built for client presentations. At the completion of a job, models not wanted by clients are sold to an arts and crafts retailer. Mae- Doff Designs uses the realized value method of accounting for model sales. The sales value of each model is credited to the cost of the specific job for which the model was built. During 2013, the model for the Hedge Fund Extraordinaire building was sold for $8,500.
a. Using the net realizable value approach, give the entry to record the sale.
b. Independent of your answer to (a), assume that a model’s sales value is not credited to specific jobs. Give the entry to account for the sale of the Hedge Fund Extraordinaire model.
c. Which method would be preferable for Mae- Doff Designs to use, and why?