SCRAP

The CPA Metal Fabricators, Inc. accumulates fairly large quantities of metal shavings and trimmings from
the products it manufactures. At least once a month, the scrap metal is sold to a local producer for the
further processing. This month's scrap sales on account total P5,200. 

Required:( 3 points)
Give the appropriate journal entry to record the sale of the scrap for each of the following altern

1. The scrap sales are viewed as additional revenue

2. The scrap sales are viewed as a reduction to cost of specific job 
3. The scrap sales are viewed as a reduction of manufacturing overhead control

Journal Entry
1 Account receivable 5,200
Scrap revenue 5,200

2 Scrap Inventory 5,200

WIP 5,200

Accounts receivable 5,200

Scrap Inventory 5,200

3 Scrap Inventory 5,200

MOH 5,200

Account receivable 5,200

Scrap Inventory 5,200
and trimmings from
producer for the

each of the following alternatives:

Spoiled Goods
P Foundry Inc., manufactures custom metal products that require casting, such as engine blocks, pistons,
and engine housing. During the current period, an order for 5,000 custom housings was begun on job
number 3387 for R 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 P15 each.
Spoiled goods are kept in a inventory account separate from Finished Goods. Total cost charged to job
number 3387 are:

Materials 46,000
Labor (1,000 x P14 per hour) 14,000
Factory Overhead (P30 per labor hour) 30,000
Total Cost charged to job number 3387 90,000
Units produce 5,000
Unit Cost 18

Required: (2 points)

1. Assuming that the spoiled units are the result of an internal failure, prepare the appropriate general
journal entry to record the transfer of spoiled units to Spoiled Goods Inventory and shipment of Job
number 3387 to the customer. 

2. Assuming that the defective units are the result of a change is design specifies by the customer after
the units are completed, prepare the appropriate general journal entry to record the transfer of the
defective units to Spoiled Goods Inventory and shipment of job number 3387 to customer. 

1. Internal failure 2. Customer specifications

Materials 46,000 Materials
Labor (1,000 x P14 per hour) 14,000 Labor (1,000 x P14 per hour)
Factory Overhead 30,000 Factory Overhear
Total Cost charged to number 3387 90,000 Total cost charged to numbe
Cost of Spoiled Goods 3,600 Disposal Value
Total cost 86,400 Total cost
Units produced 4,800 Units produced
Unit Cost 18 Unit Cost

Journal Entry: Journal Entry

Spoiled goods invty 3,000 Spoiled goods invty

MOH Control 600
WIP 3,600

Cash/AR 3,000 Cash/AR

Spoiled goods invty 3,000
 ine blocks, pistons,
as begun on job
nspected and 200
with only 4,800
ds for P15 each.
Total cost charged to job

propriate general
ipment of Job

e customer after
ransfer of the

2. Customer specifications
46,000
Labor (1,000 x P14 per hour) 14,000
Factory Overhear 30,000
Total cost charged to number 3387 90,000
Disposal Value 3,000
Total cost 87,000
Units produced 4,800
18.125

Journal Entry

Spoiled goods invty 3,000

WIP 3,000

3,000
Spoiled goods inventory 3,000
Defective Goods
Troy Cabinet Co. manufactures custom cabinets for modular and prefabricated housing companies.
During the current period, an order for 1,000 custom cabinets was begun on job number 89621 for
Baggy Housing Corp. Custom jobs are marked up 150% of cost. Total costs charged to job number 89621 are:

Materials 92,000
Labor (3,000 hours x P12 per hour) 36,000
Factory Overhead (P24 per labor hour) 72,000

On inspection, 100 of the cabinets were found to have defects. Materials costing P4 and 1/2 hour of
labor are required to correct each defective unit. Factory overhead is charged to production on the basis
of direct labor hours. 

Required: (2 points) Prepare the appropriate general journal entries assuming that spoilage were cause by (a)
internal failure or common to all jobs  (b) change in the specification made by customer or attributable to
specific job

Attributable Common
Materials 92,400 92,000
Labor (3,000 x P12 per hour) 36,600 36,000
Factory Overhead (P24 per labor hour) 73,200 72,000
Total Cost 202,200 200,000
Units produced 1,000 1,000
Unit costs 202.2 200
Mark up 150% 150%
Selling price 303.3 300

Journal entry
WIP 2,200 MOH
Direct materials 400 Direct materials
Salaries expense 600 Salaries expense
MOH Control 1,200 MOH Control
umber 89621 are:

Materials 400
n on the basis DL 600
FOH 1200
2200
were cause by (a)
attributable to

2,200
400
600
1,200