Exam 18: Spoilage, Rework, and Scrap

Recognizing the value of scrap in the accounting records is always done at the time the scrap is produced.

Which of the following INCORRECTLY reflects what units passed inspection this period? Assume beginning work in process was completed and ending work in process was started during the period.

If scrap is returned to the company's storeroom and inventoried, it should NOT have any value in the accounting records.

When a unit has to be reworked, the rework may be classified in three ways. What are those ways, and how does the accounting for each differ?

Valentine Florists operate a flower shop. Because most of their orders are via telephone or fax, numerous orders have to be reworked. The average cost of the reworked orders is $6: $3.75 for labor, $1.50 for more flowers, and $0.75 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 48 orders out of 249. The original cost of the 48 orders totaled $720. The average cost of all orders is $16.16, including rework, with an average selling price of $30 Required: Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Arrangement Department Overhead Control. Prepare a journal entry to transfer the finished goods to Finished Goods Inventory.