Question

Barrett Kitchens produces a variety of items in accordance with special job orders from hospitals, plant cafeterias and university dormitories An order for 2, 100 cases of mixed vegetables costs $9 per case:direct materials $4; direct manufacturing labor, $3; and manufacturing overhead allocated, $2. The manufacturing overhead rate includes a provision for normal spoilage Consider each requirement independently. Assume that a laborer dropped 420 cases. Suppose part of the 420 cases could be sold to a nearby prison for $420 cash Prepare a journal entry to record this event.

Answer 1

To account for the spoiled cases and the subsequent sale to the prison, Barrett Kitchens must debit Loss on Spoiled Goods and Cash, and credit Inventory, with amounts based on the costs provided.

Step-by-step explanation:

The student's question relates to the recording of a journal entry for spoiled goods in a manufacturing context. Barrett Kitchens experienced spoilage of 420 cases of mixed vegetables, each with a total cost of $9 comprised of $4 for direct materials, $3 for direct manufacturing labor, and $2 for manufacturing overhead. Some of these cases were salvaged and sold to a nearby prison for $420 in cash.

To record this transaction, the following journal entry is necessary:

• Debit Loss on Spoiled Goods for the net cost of the spoiled goods (420 cases x $(9-1) per case to exclude the salvage value).
• Credit Inventory for the total cost of the spoiled goods (420 cases x $9 per case).
• Debit Cash for the amount received from the prison ($420).

The amounts for the debits and credits will need to be calculated based on the information provided.