Syarikat Sabah prepares lumber for companies who manufacture furniture. 

(a) The main product is finished lumber with a byproduct of wood shavings. The byproduct is sold to plywood manufacturers. For July, the manufacturing process incurred RM332,000 in total costs. 80,000 board feet of lumber were produced and sold along with 6,800 kg of shavings. The finished lumber sold for RM6.00 per board foot and the shavings sold for RM0.60 a kg. There were no beginning or ending inventories. 

Required: 

Prepare two statements of financial position as at 31 December 2019 showing the byproduct as a cost reduction during production, and as a revenue item when sold each. 

(b) Distinguish and briefly discuss the merits (or demerits) between the two principal methods of accounting for byproducts: the production byproduct method and the sale byproduct method. 

(c) Identify the revenue or expense amounts necessary to make a sell-or-process-further decision and the reasons behind them. 

(d) Identify the four methods of allocating joint costs to individual products and the most preferred method among accountants.

Answer rating: 100% (QA)

Solution a Methods of accounting of Byproducts There are mainly two methods 1The production method o... View the full answer