Happy Trail Adventure Products is a manufacturer of golf carts. Joe Smith, the plant manager of Happy Trail, provided the following information for Job #202 in April 2021. A total of 50 units were started, and 3 spoiled units were detected and rejected at final inspection. The spoiled units were considered to be normal spoilage. Costs prior to the inspection point are $1,200 per unit. The current disposal price of the spoiled units is $600 per unit. When spoilage is detected, the spoiled units are inventoried at $600 per unit.

 

Required:

1.     Prepare journal entries to record the normal spoilage, assuming:

        a.    The spoilage is related to a specific job.

        b.    The spoilage is common to all jobs.

        c.     The spoilage is considered to be abnormal spoilage.

2.     Assume that 2 spoiled units can be reworked for a total cost of $800. A total cost of $2,400 associated with these units has already been assigned to job #202 before the rework. Prepare journal entries for the rework assuming:

        a.    The rework is related to a specific job.

        b.    The rework is common to all jobs.

        c.     The rework is considered to be abnormal.

Answer rating: 100% (QA)

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