If scrap is reused as direct material rather than sold as scrap, which of the following would be the proper account?
A) Accounts Receivable is debited at its estimated net realizable value and then credited when the scrap is reused
B) Materials Control is debited at its estimated net realizable value and then credited when the scrap is reused
C) Manufacturing Overhead Control is debited at its estimated net realizable value and then credited when the scrap is reused
D) Work-in-Process Control is debited at its estimated net realizable value and then credited when the scrap is reused

Question

Quizplus · Accepted Answer

If scrap is reused as direct material, it should be accounted for as Materials Control. It should be debited at its estimated net realizable value, which reflects the amount that could be earned if the scrap had been sold as scrap. It should then be credited when it is reused in production as direct material.

If Scrap Is Reused as Direct Material Rather Than Sold