Which statement is NOT true regarding the sales method of accounting for byproducts.
A) The method makes no journal entries until the byproduct is sold.
B) This method is the preferred method because of the matching principle.
C) Revenues of the byproduct can be recorded in the income statement as revenue.
D) Revenues of the byproduct can be recorded as a reduction of cost of goods sold in the income statement.
E) No value is attached to the byproduct inventory.

Question

Quizplus · Accepted Answer

This statement is not true because the sales method of accounting for byproducts is not actually the preferred method. The preferred method is the production method, which recognizes the byproduct's value at the time of production and accounts for it as a reduction of production costs. The sales method, on the other hand, only recognizes the byproduct's value when it is sold and does not match the cost of production with the revenue earned.

Which Statement Is NOT True Regarding the Sales Method of Accounting