Reference no: EM132820672

Question - A company engages in a manufacturing process that uses one input product (Q) to produce three outputs (X, P, and Z). outputs X and P are considered main products and output Z is by-product. During the recent month, the following events occurred:

1. Produced and sold 200 units of X and 100 units of P. produced 25 units of Z.

2. Recorded sales revenue of P35,000 from sales of X and P. The cost of sales before accounting for the by-product was P18,000.

3. Incurred P125 to process the 25 units of Z to completion. These costs are charged as they are incurred against any by products' sales. (None of these by-product costs are kept in inventory at the end of the period.)

4. Received P570 in revenue from the sale of 10 units of Z.

Required -

1. Prepare statement showing, in parallel columns, the sales revenue, other income, costs of goods sold, separate costs to process by-products, and gross margin that would be reported for each of the two methods.

2. Prepare journal entries under the two methods of accounting for by-products.