CHAPTER 1

COST — CONCEPTS AND CLASSIFICATIONS

1-2. Enumerate the components that make up prime cost.

1. Direct Labor
2. Direct Materials

3-4. Enumerate the components that make up conversion cost.

3. Direct Labor
4. Factory Overhead

5-7. Enumerate the components that make up Factory Overhead

- Control.
5. Indirect Materials
6. Indirect Labor
7. Other Production Costs

8-10. Enumerate the components that make up total production

cost (normal cost system).
8. Direct Materials
9. Direct Labor
10. Factory Overhead - Applied

11-13. Enumerate the components that make up total

production cost (actual cost system).
11. Materials
12. Labor
13. Factory Overhead

14-15. Enumerate the components that make up total operating

expenses.
14. Administrative Expenses
15. Selling Expenses

16-20. Enumerate the components that make up total cost to

produce and sell (actual cost system).
16. Direct Materials
17. Direct Labor
18. Other Production Cost
19. Indirect Materials
20. Indirect Labor

1
1. Defined as an exchange price, the value foregone, or
sacrifice of resources which is identifiable and measurable,
made to secure benefit. A. COST

2. In a profit-making firm, future benefits usually mean

___________________. A. INCOMES

3. ____________________________ controls pertain to controls

instituted to correct or adjust completed activities. A.
FEEDBACK CONTROLS

4. ______________________________ pertain to controls

created to anticipate and prevent possible or probable
problems. C. FEEDFORWARD CONTROLS

5. ______________________________ pertain to controls

established to monitor and check ongoing process.
B. CONCURRENT CONTROLS

6. ______________________________ consists of salaries

(basic pay) paid to the factory employees who are directly
involved in converting materials into finished product.
A. DIRECT LABOR

7. Costs that vary in direct proportion to volume of

production. B. VARIABLE COSTS

8. Cost of completed goods that have not been sold at the

end of the accounting period. C. FINISHED GOODS INVENTORY

9. Expenditures incurred in the past and cannot be changed

no matter what action is taken now or in the future.
A. SUNK COSTS

10. The value of the best alternative foregone as the result

of selecting a different use of resource or by choosing a
particular strategy. B. OPPORTUNITY COSTS

2
1. The cost associated with goods partially completed at the
end of the accounting period. A. WORK IN PROCESS INVENTORY

2. These costs are directly traceable to the goods being

produced in a practical and feasible manner. B. DIRECT COSTS

3. Cost over which a particular level of managements has no

significant influence. C. NON CONTROLLABLE COST

4. Expenditures incurred in acquiring current assets and

payments of various expenses to generate income are called
_______________. D. REVENUE EXPENDITURES

5. Cost that must be met with a current or near future

expenditure or cash outlay. B. OUT-OF-POCKET COST

6. Cost that are expected to be incurred for a given period.

A. BUDGETED COST

7. Expenditures incurred in acquiring non-current assets are

called _________________. B. CAPITAL EXPENDITURES

8. These are manufacturing cost or product cost except:

C.ADMINISTRATIVE EXPENSE

9. Cost that remain constant in total, regardless of the

volume of the production. A. FIXED COST

10. ___________________ are a set of benchmarks used to

measure the performance of the company with respect to
controlling costs and for internal repetitive contracting.
D. STANDARD COSTS

EXERCISE I

3
1. Diamond to make a ring. Direct Material
2. Iron to make bridge. Direct Material
3. Paper used in books. Direct Material
4. Foam to make beds. Direct Material
5. Water to make soft drinks. Direct Material
6. Wheels to be installed in a car. Direct Material
7. Cotton to make linen. Direct Material
8. Flour used in making breads. Direct Material
9. Mayonnaise in hamburger. Indirect Material
10. Gold to make necklace. Direct Material
11. Cocoa to make chocolates. Direct Material
12. Milk to make ice cream. Direct Material
13. Leather to make shoes. Direct Material
14. Eggs to make cakes. Direct Material
15. Pineapple to make pineapple juice. Direct Material

EXERCISE II
1. Woods A. DIRECT MATERIALS
2. Nails C. FACTORY OVERHEAD
3. Varnish C. FACTORY OVERHEAD
4. Sand papers C. FACTORY OVERHEAD
5. Carpenter’s salary B. DIRECT LABOR
6. Salesman’s salary E. SELLING EXPENSE
7. Freight Out E. SELLING EXPENSE
8. Advertising E. SELLING EXPENSE
9. Salary of messenger and janitor in the factory
C. FACTORY OVERHEAD
10. Factory supervisor’s salary C. FACTORY OVERHEAD
11. Accountant’s salary D. ADMINISTRATIVE EXPENSE
12. HRD manager’s salary D. ADMINISTRATIVE EXPENSE
13. Company president’s salary D. ADMINISTRATIVE EXPENSE
14. Depreciation of factory equipment C. FACTORY OVERHEAD
15. Depreciation of office - FF & E D. ADMINISTRATIVE
EXPENSE

CHEDLYN CORPORATION

4
1. Complete the schedule of the company’s total and unit
costs above.

Units Produced and Sold

75,000 87,500 100,000
Total costs:
Variable costs ₱800,000.00 ₱933,625.00 ₱1,067,000.00
₱1,700,000.0
Fixed costs ₱1,700,000.00 ₱1,700,000.00
0

₱2,500,000.0
Total costs ₱2,633,625.00 ₱2,767,000.00
0

Cost per unit:

Variable cost ₱10.67 ₱10.67 ₱10.67
Fixed cost ₱22.67 ₱19.43 ₱17.00
Total cost per unit ₱33.33 ₱30.10 ₱27.67

2. Assume that the company produces and sells 90,000 units

during the year. The selling price is ₱37.00 per unit.
Prepare an income statement in the condition format for the
year.

Sales ₱3,330,000.00
Variable Cost -₱960,300.00
Contribution Margin ₱2,369,700.00
Fixed Cost -₱1,700,000.00
Net Income ₱669,700.00

RIZAL MANUFACTURING COMPANY

5
1. Compute the prime cost unit.
Direct Materials ₱64.00
Direct Labor ₱20.00
Prime cost per unit ₱84.00

2. Compute the conversion cost per unit at 10,000 units

production level.

Fixed factory overhead ₱120,000.00

Production level 10,000
Fixed factory overhead
₱12.00
per unit
Add: Direct labor ₱20.00
Variable factory
₱30.00
overhead
Conversion cost per unit ₱62.00

3. At the production level and sales volume of 10,000 units

(Production = Sales), determine the following using
absorption costing:

a. Manufacturing cost per unit

Fixed factory overhead ₱120,000.00

Sales volume 10,000

Fixed factory overhead

₱12.00
per unit

Direct materials ₱64.00

Direct labor ₱20.00
Variable factory
₱30.00
overhead
Manufacturing cost per
₱126.00
unit

b. Gross margin per unit

Sales price ₱180.00

Less: Manufacturing cost per unit - ₱126.00
Gross margin per unit ₱54.00

6
c. Total manufacturing cost

Direct Materials ₱64.00

Direct Labor ₱20.00
Variable factory overhead ₱30.00
Manufacturing cost per unit ₱114.00
Sales volume 10,000
₱1,140,000.00
Add: Fixed factory
₱120,000.00
overhead
Total manufacturing cost ₱1,260,000.00
d. Gross margin

Direct Materials ₱64.00

Direct Labor ₱20.00
Prime cost per unit ₱84.00
Sales volume 10,000
Prime cost ₱840,000.00
Less: Fixed factory overhead ₱120,000.00
Fixed marketing expense ₱80,000.00
Fixed administrative expense ₱100,000.00
Gross margin ₱540,000.00

e. Net profit

Sales price ₱180.00

₱1,800,000.0
Sales volume 10,000
0
Revenue
Less: Variable Costs
Direct Materials ₱640,000.00
Direct Labor ₱200,000.00
Variable factory overhead ₱300,000.00
Variable marketing expense ₱60,000.00
Fixed factory overhead ₱120,000.00
Fixed marketing expense ₱80,000.00
₱1,500,000.0
Fixed administrative expense ₱100,000.00
0
Net Profit ₱300,000.00

7
CLEAR & CLEAN MANUFACTURING CORPORATION

1. Prepare a schedule of Cost of Goods Manufactured.

COST OF GOODS MANUFACTURED

Raw materials, January 1 ₱90,000.00
Purchase of raw ₱800,000.00
Raw materials available for use ₱890,000.00
Less: Raw materials, December 31 -₱60,000.00
Direct materials ₱830,000.00
Direct labor ₱450,000.00
Factory overhead
Depreciation ₱162,000.00
Insurance ₱40,000.00
Maintenance ₱87,000.00
Utilities ₱36,000.00 ₱325,000.00
Total manufacturing cost ₱1,605,000.00
Work in process, January 1 ₱180,000.00
Total goods in process ₱1,785,000.00
Less: Work in process, December 31 -₱100,000.00
Cost of goods manufactured ₱1,685,000.00
Finished goods, January 1 ₱260,000.00
Total goods available for sale ₱1,945,000.00
Less: Finished goods, December 31 -₱210,000.00
Cost of goods sold ₱1,735,000.00

2. Prepare a Statement of Income.

CLEAR & CLEAN MANUFACTURING CORPORATION

Income Statement
For the year ended 20xx

Sales ₱2,500,000.00
Total goods available for sale ₱1,945,000.00
Ending inventory ₱210,000.00
Cost of goods sold ₱1,735,000.00
Gross profit ₱765,000.00
Selling expenses ₱140,000.00
Administrative expenses ₱270,000.00 ₱410,000.00
Net income ₱355,000.00

8
1. The period between the placement of the order and the
receipt of the materials ordered. A. LEAD TIME

2. Refer to the additional inventory as a cushion against

possible stock outs. B. SAFETY STOCK

3. A physical control of materials whereby the functions of

materials requisition, purchasing, checking & receiving,
warehousing & releasing, and recording are segregated.
C.SEGREGATION OF DUTIES AND RESPONSIBILITIES

4. An inventory management model that computes the units of

materials that should be purchased to minimize total
relevant inventory costs. D. EOQ MODEL

5. Under this method, cost follows the usual physical flow

of the materials. The cost of materials purchased first is
the first cost to be issued into production. C. FIFO METHOD

6. Costs incurred in maintaining or storing inventories.

A. CARRYING COSTS

7. These are deductions from invoice price when payment is

made within the discount period. C. CASH DISCOUNTS

8. The transportation charge incurred in connection with the

purchase of materials. A. FREIGHT IN

9. The freight charging method whereby freight incurred is

added to the invoice price of materials. B. DIRECT CHARGING

10. This strategy strives to improve a business return on

investment by eliminating stocks of materials and finished
goods inventory, thereby eliminating the associated carrying
costs. B. JUST IN TIME

9
1. Refers to the inventory level where a purchase order
should be placed. B. REORDER POINT

2. An inventory method that sets the limits in inventory

balances. The minimum inventory level serves, as the reorder
point. C. MIN-MAX METHOD

3. A selective control model that classifies inventories

into three classes; high value, average value and low value
items. A. ABC CLASSIFICATION

4. A method of costing materials wherein the first (or

earliest) cost recorded for a particular type of materials
in its stock card or subsidiary ledger is the first cost
taken out. A. FIFO METHOD

5. It is a price or percentage reduction from a published

list price offered to generate sales, that is, to encourage
customer (buyer) to purchase in large quantity (volume).
D.TRADE DISCOUNT

6. It is a price or percentage reduction from the invoice

price offered to encourage prompt payment by customers.
C.CASH DISCOUNT

7. A buffer stock that serves as a cushion against possible

stock outs. B. SAFETY STOCK

8. An inventory management model that computes the units of

materials that should be purchased to minimize total
relevant inventory costs. D. EOQ MODEL

9. It is the average daily usage during the lead time

period. B. LEAD TIME QUANTITY

10. Described as stockless production, inventory being seen

as wasted investment that could be released for the profit
earning activities. B. JUST IN TIME

10
 LUNA CORPORATION

Required: The cost of materials used and the cost assigned

to the inventory at the end of the month using

PERPETUAL SYSTEM

A. FIFO method
PERPETUAL / FIFO METHOD
RECEIPTS ISSUANCE BALANCE
1,000 ₱11.00 ₱11,000.00
8,000 ₱12.00 ₱96,000.00 8,000 ₱12.00 ₱96,000.00
1,000 ₱11.00 ₱11,000.00
7,500 ₱12.00 ₱90,000.00 500 ₱12.00 ₱6,000.00
8500 ₱11.50 ₱97,750.00 8,500 ₱11.50 ₱97,750.00
500 ₱12.00 ₱6,000.00
7,500 ₱11.50 ₱86,250.00 1,000 ₱11.50 ₱11,500.00
COGS ₱193,250.00 Inv., end ₱11,500.00

B. Moving Average Method

PERPETUAL / MOVING AVERAGE METHOD

RECEIPTS ISSUANCE BALANCE
1,000 ₱11.00 ₱11,000.00
8,000 ₱12.00 ₱96,000.00 9,000 ₱11.89 ₱107,000.00
8,500 ₱11.89 ₱101,065.00 500 ₱11.89 ₱5,935.00
8500 ₱11.50 ₱97,750.00 9,000 ₱11.52 ₱103,685.00
8,000 ₱11.52 ₱92,160.00 1,000 ₱11.52 ₱11,525.00
COGS ₱193,225.00 Inv., end ₱11,525.00

11
Dianne is a designer in a garment manufacturing company
receiving a basic pay of ₱750.00 per day.

1. What is her wage for the day if she works on her rest
day? B. ₱975.00

2. What is her wage for the day if she works on a special

day? B. ₱975.00

3. What is her wage for the day if she works on a regular

holiday? B. ₱1,500.00

4. What is her wage for the day if she works on a special

day which is also a scheduled rest day? D. NOT GIVEN

5. What is her wage for the day if she works on a regular

holiday which is also a scheduled rest day? C. ₱1,950.00

6. What is her total pay for the day id she works with 3
hours overtime on regular day? B. ₱1,101.57

7. What is her total pay for the day if she works with 3
hours overtime on special day? D. NOT GIVEN

8. What is her total pay for the day if she works with 3
hours overtime on a special day which is also her scheduled
rest day? C. ₱1,673.46

9. What is her total pay for the day if she works with 3
hours overtime on a regular holiday? C. ₱2,231.25

10. What is her total pay for the day if she works with 3
hours overtime on a regular holiday which is also her
scheduled rest day? D. NOT GIVEN

12
1. Factory costs that, by their physical description, can
not be traced to specific units of products. D. FACTORY
OVERHEAD

2. Factory costs that could be traced to particular units

but with immaterial costs. D. FACTORY OVERHEAD

3. It represents a costs incurred in the factory that are

not classified as direct materials or direct labor.
B.FACTORY OVERHEAD

4. In actual cost system, the following are not cost

components of factory overhead except: A. DIRECT MATERIALS

5. Overhead items are often classified into: A. VARIABLE AND

FIXED

6. A cost system that uses an applied overhead rate to

allocate factory overhead costs to jobs. B. NORMAL COST
SYSTEM

7. The formula to estimate predetermined factory overhead

rate based on units of production. A. TOTAL BUDGETED
OVERHEAD / ESTIMATED UNITS OF PRODUCTION

8. The formula to estimate predetermined factory overhead

based on direct materials cost. B. TOTAL BUDGETED OVERHEAD /
ESTIMATED DIRECT MATERIALS COST

9. The formula to estimate predetermined factory overhead

rate based on direct labor cost. C. TOTAL BUDGETED
OVERHEAD / ESTIMATED DIRECT LABOR COST

10. The formula to estimate predetermined factory overhead

rate based on direct labor hours. D. TOTAL BUDGETED OVERHEAD
/ ESTIMATED DIRECT LABOR HOURS

11. The formula to estimate predetermined factory overhead

rate based on machine hours. A. TOTAL BUDGETED OVERHEAD /
ESTIMATED MACHINE HOURS

13
GREEN COMPANY

The company uses a predetermined overhead rate to charge

overhead cost to production. The rate for the year was ₱20
per machine-hour; a total of 10,000 machine-hours was
recorded for the year.

Required:

1. Compute the amount of under or over applied overhead cost

for the year.

Total applied cost ₱200,000.00

Total actual cost -₱197,000.00
Over-applied ₱3,000.00

2. Prepare a schedule of cost of goods manufactured for the

year.

COST OF GOODS MANUFACTURED

December 20xx
Direct materials used:
Raw materials, January ₱16,000.00
Purchases ₱256,000.00
Direct materials available ₱272,000.00
Raw materials, December -₱14,000.00 ₱258,000.00
Direct labor ₱320,000.00
Factory overhead applied ₱200,000.00
Total manufacturing cost ₱778,000.00
Work in process, January ₱12,000.00
Total goods placed into process ₱790,000.00
Work in process, December -₱15,000.00
Cost of goods manufactured ₱775,000.00

SEATWORK (p. 192-193)

Specialist Inc.

Prepare the following:

a. Journal

14
SPECIALIST INC

15
Raw materials ₱400,000.00
Accounts payable ₱400,000.00
--//--
Work in Process ₱320,000.00
Factory Overhead - Control ₱80,000.00
Raw materials ₱400,000.00
--//--
Factory Overhead - Control ₱102,000.00
Accrued expenses ₱102,000.00
--//--
Factory Overhead - Control ₱224,000.00
Administrative expenses ₱42,000.00
Selling expenses ₱14,000.00
Accumulated
₱280,000.00
Depreciation
--//--
Work in Process ₱400,000.00
Factory Overhead - Control ₱180,000.00
Selling expenses ₱104,000.00
Administrative expenses ₱250,000.00
Salaries and Wages
₱934,000.00
Payable
--//--
Factory Overhead - Control ₱24,000.00
Selling expenses ₱3,000.00
Administrative expenses ₱3,000.00
Prepaid Insurance ₱30,000.00
--//--
Selling expenses ₱10,000.00
Administrative expenses ₱8,000.00
Accrued expenses ₱18,000.00
--//--
Work in Process ₱600,000.00
Factory Overhead -
₱600,000.00
Applied
--//--
Finished goods inventory ₱1,400,000.00
Work in Process ₱1,400,000.00
--//--
Cost of goods sold ₱1,500,000.00
Accounts receivable ₱2,500,000.00
Finished goods
₱1,500,000.00
inventory
Sales ₱2,500,000.00
--//--
Cash ₱2,170,000.00
Accounts receivable ₱2,170,000.00
--//--

16
 Accounts payable ₱700,000.00
Salaries and Wages Payable ₱900,000.00
Cash ₱1,600,000.00
--//--

b. General Ledger

CASH DEBIT CREDIT BALANCE

Jan. 1 Beginning balance ₱80,000.00 ₱80,000.00
₱2,170,000.0
Dec. 31 Collection from customer ₱2,250,000.00
0
Payments ₱1,600,000.00 ₱650,000.00

ACCOUNTS RECEIVABLE DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱130,000.00 ₱130,000.00
₱2,500,000.0
Dec. 31 Sold on account ₱2,630,000.00
0
Collections ₱2,170,000.00 ₱460,000.00

RAW MATERIALS DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱70,000.00 ₱70,000.00
Dec. 31 Purchased ₱400,000.00 ₱470,000.00
Collections ₱400,000.00 ₱70,000.00

WORK IN PROCESS DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱180,000.00 ₱180,000.00
Dec. 31 Used in production ₱320,000.00 ₱500,000.00
Incurred ₱400,000.00 ₱900,000.00
Applied ₱600,000.00 ₱1,500,000.00
Finished goods ₱1,400,000.00 ₱100,000.00

FINISHED GOODS DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱450,000.00 ₱450,000.00
₱1,400,000.0
Dec. 31 Transferring ₱1,850,000.00
0
Cost of goods sold ₱1,500,000.00 ₱350,000.00

PREPAID INSURANCE DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱200,000.00 ₱200,000.00
Dec. 31 Expiry ₱30,000.00 ₱170,000.00

ACCUMULATED DEBIT CREDIT BALANCE

17
 DEPRECIATION
Jan. 1 Balance forwarded ₱420,000.00 ₱420,000.00
Dec. 31 Depreciation ₱280,000.00 ₱700,000.00

ACCOUNTS PAYABLE DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱300,000.00 ₱300,000.00
Dec. 31 Purchase ₱400,000.00 ₱700,000.00
Payment ₱700,000.00 -

SALARIES & WAGES

DEBIT CREDIT BALANCE
PAYABLE
Dec. 31 Salaries & wages unpaid ₱934,000.00 ₱934,000.00
Salaries & Wages ₱900,000.00 ₱34,000.00

ACCRUED EXPENSE DEBIT CREDIT BALANCE

Dec. 31 Cost incurred ₱102,000.00 ₱102,000.00
Cost incurred ₱580,000.00 ₱682,000.00
Cost incurred ₱18,000.00 ₱700,000.00

ACCOUNTS PAYABLE DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱1,500,000.00 ₱1,500,000.00

RETAINED EARNINGS DEBIT CREDIT BALANCE

Jan. 1 Balance forwarded ₱780,000.00 ₱780,000.00

SALES DEBIT CREDIT BALANCE

Dec. 31 Collection ₱2,170,000.00 ₱2,170,000.00

COST OF SALES DEBIT CREDIT BALANCE

Dec. 31 Cost of goods sold ₱1,500,000.00 ₱1,500,000.00

FACTORY OVERHEAD -
DEBIT CREDIT BALANCE
CONTROL
Dec. 31 Factory Overhead ₱80,000.00 ₱80,000.00
Factory Overhead ₱102,000.00 ₱182,000.00
Factory Overhead ₱224,000.00 ₱406,000.00
Factory Overhead ₱180,000.00 ₱586,000.00
Factory Overhead ₱24,000.00 ₱610,000.00

FACTORY OVERHEAD -
DEBIT CREDIT BALANCE
APPLIED
Dec. 31 Factory Overhead ₱600,000.00 ₱600,000.00

18
 EXPENSE -
DEBIT CREDIT BALANCE
ADMINISTRATIVE
Dec. 31 Plant & Equipment ₱42,000.00 ₱42,000.00
Administrative Salaries ₱250,000.00 ₱292,000.00
Insurance ₱3,000.00 ₱295,000.00
Expenses ₱8,000.00 ₱303,000.00

EXPENSE - SELLING DEBIT CREDIT BALANCE

Dec. 31 Property, Plant & Equipment ₱14,000.00 ₱14,000.00

Sales commissions ₱104,000.00 ₱118,000.00
Insurance expired ₱3,000.00 ₱121,000.00
Miscellaneous ₱10,000.00 ₱131,000.00

c. Statement of Profit or Loss

SPECIALIST INC
Statement of Profit or Loss
December 31, 20xx
Cash ₱2,170,000.00
Less: Cost of sales -₱1,500,000.00
Gross profit ₱670,000.00
Less: Operating expenses
Administrative expenses ₱303,000.00
Selling expenses ₱131,000.00 ₱434,000.00
Net profit ₱236,000.00

d. Statement of Changes in Equity

SPECIALIST INC
Statement of Changes in Equity
December 31, 20xx
Additional paid Retained
Capital stock Reserves
in capital Earnings
Balances, January ₱1,500,000.00 - - ₱780,000.00
Correction, prior period
Issuance of ordinary shares ₱236,000.00
Net income
Dividends paid
Appropriation
₱1,500,000.0
Balances, December 31 ₱1,016,000.00
0

19
e. Closing Entries

CLOSING ENTRIES
Sales ₱2,170,000.00
Revenue and Expense
₱2,170,000.00
Summary
--//--
Revenue and Expense Summary ₱1,500,000.00
Cost of Sales ₱1,500,000.00
--//--
Revenue and Expense Summary ₱434,000.00
Administrative expenses ₱303,000.00
Selling expenses ₱131,000.00
--//--
Revenue and Expense Summary ₱236,000.00
Retained Earnings ₱236,000.00
--//--

20
EXERCISE I - SET A

Required: Prepare the appropriate journal entry to record

the sale of the crap for each of the following alternatives:

1. Scrap sale is viewed as additional revenue

Accounts receivable ₱15,000.00
Scrap Income ₱15,000.00

2. Scrap sale is viewed as reduction of cost of goods sold

Accounts receivable ₱15,000.00

Cost of goods sold ₱15,000.00

3. When scrap materials are traceable as indirect materials

Accounts receivable ₱15,000.00
Factory Overhead - Control ₱15,000.00

4. When scrap materials are traceable as direct materials

Accounts receivable ₱15,000.00

Work in Process ₱15,000.00

21
EXERCISE I- SET B

Required: Prepare the appropriate journal entry to record

the sale of the crap for each of the following alternatives:

1. Scrap sale Is viewed as additional revenue

Accounts receivable ₱14,000.00
Scrap Income ₱14,000.00

2. Scrap sale is viewed as reduction of cost of goods sold

Accounts receivable ₱14,000.00
Cost of goods sold ₱14,000.00

3. When scrap materials are traceable as indirect materials

Accounts receivable ₱14,000.00

Work in Process ₱14,000.00

4. When scrap materials are traceable as direct materials

Accounts receivable ₱14,000.00

Work in Process ₱14,000.00

22
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