Journal Entries for Spoiled Units. The Hayes Company manufactures Product C at a cost per unit of $6
Journal Entries for Spoiled Units. The Hayes Company manufactures Product C at a cost per unit of $6 that consists of $1 for material, $2 for labor, and $3 for factory overhead costs. During May, 1,000 units were spoiled that could have been sold for $.60 each. The accountant said that the entry for these
1,000 spoiled units could be one of these four:
Entry Debit Credit
Spoiled Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Work in Process –
Materials. …. . . . . . . . . . . . . .
100
Wor k in Process –
Labor. . . . . . . . . . . . . . . . . . . . .
200
Work in Process –
Factory Overhead. . . . . . . . . .
300
2
Spoiled Goods
.
600
Factory Overhead Control
.
5,400
Work in Process – Materials
.
1,000
Work in Process – Labor
.
2,000
Work in Process – Factory Overhead
.
3,000
3
Spoiled Goods
.
600
Loss on Spoiled Goods
.
5,400
Work in Process – Materials
.
1,000
Work in Process – Labor.
.
2,000
Work in Process – Factory
Overhead
.
3,000
Accounts Receivable
.
5,400
Work in Process –
Materials
.
1,000
Work in Process –
Labor
.
2,000
Work in Process –
Factory Overhead
.
3,000
4 Spoiled Goods .
600
Required: The circumstances under which each of the above entries would be appropriate.
(AICPA adapted)