The Hawg Manufacturing Shop produces motorcycle parts.Typically, 20 pieces out of a job lot of 2,000 parts are normally spoiled.Costs are assigned at the inspection point, $100.00 per unit.Spoiled pieces may be disposed of for proceeds of $20.00 per unit.The spoiled goods must be inventoried appropriately when the normal spoilage is detected.The current job requires the production of 5,000 good parts.Which of the following journal entries properly reflects the recording of spoiled goods?

Question

Quizplus · Accepted Answer

The journal entry should reflect the normal spoilage of 20 pieces out of the job lot of 2,000 parts. The cost of each unit is $100, so the total cost of the spoiled goods is $2,000 (20 x $100). The proceeds from the disposal of the spoiled goods are $20 per unit, which totals to $400 (20 x 20). Therefore, the journal entry should be a debit to the inventory account for $2,000 and a credit to the proceeds account for $400. The entry in choice B reflects this correctly.

The Hawg Manufacturing Shop Produces Motorcycle Parts