Question

The following information relates to the Blending Department of Gamma Inc. for the month of March:

Units Percent Complete (Conversion)

Units Started: 55,000   

Completed and Transferred 50,000

Beg WIP 15,000 70%

End WIP 16,000 40%

Costs for March: Materials Labor and OH Transferred-In

Beg WIP $48,000 $37,100 $76,000

Added during month $232,000 $171,500 $274,000

All materials are added at the beginning of the process. Inspection occurs 80 percent of the way through the process. Normal Spoilage is 5 percent of the good units completed. Gamma Inc uses the weighted average method.

What is the journal entry to record abnormal spoilage?

Answer 1

Calculating Cost of Abnormal Spoilage Loss:
	Phy units	Material	Conversion costs	Total
Beg WIP	15000	15000	15000
Started & Completed units	35000	35000	35000
Transferred out (ie. FG)	50000
Normal loss (5% of FG)	2500
Abnormal loss (A)	1500	1500	1200
End WIP	16000	16000	6400
Equivalent units		67500	57600
Total Cost:
Beg WIP		48000	113100
Incurred in month		232000	445500
Total Cost:		280000	558600
Cost per Eq (B)		4.15	9.70
Cost of Abnormal loss (A*B)		6222.22	11637.50	17859.72
Journal Entry :
Account Titles	Debit $	Credit $
Abnormal spoilage	17859.72
WIP - Blending		17859.72
(transferring the abnormal spoilage from WIP account)
Income Summary	17859.72
Abnormal spoilage		17859.72
(Finally abnormal spoilage transferred to Income Summary as loss)