Rowe Co.'s Job 401 for the manufacture of 2,200 wagons was completed during August at the unit costs presented below. Final inspection of Job 401 disclosed 200 wagons that were sold to a jobber for $6,000.
Assume that the spoilage loss is charged to all production during August.What would be the journal entry to record the spoilage?

Question

Rowe Co.'s Job 401 for the manufacture of 2,200 wagons was completed during August at the unit costs presented below.  ​ Final inspection of Job 401 disclosed 200 wagons that were sold to a jobber for $6,000.
Assume that the spoilage loss is charged to all production during August.What would be the journal entry to record the spoilage?

Quizplus · Accepted Answer

Spoilage loss is a type of manufacturing overhead, so it should be charged to Factory Overhead account. However, the Work in Process account should also be reduced since it represents the cost of goods in the production process that were spoiled. The Spoiled Goods Inventory account should only be used if the spoiled goods are kept separate from the rest of the inventory and can be sold or used in a later production run. Since there is no mention of this in the question, option C is the best choice.

Rowe Co'S Job 401 for the Manufacture of 2,200 Wagons Was