Pyramid Printing Company’s Controller, Sally Sound, has been approached by the c
ID: 2815210 • Letter: P
Question
Pyramid Printing Company’s Controller, Sally Sound, has been approached by the company’s President, Mike Maryland, to optimize green sustainability initiatives and work with the production staff to maximize recycling income. After conferring with the production and warehouse staff, Sally noted that the company’s paper roll cores are never fully used due to the timing of the web gluing process. Sally Sound then assessed an opportunity for Pyramid’s paper roll cores to be sold as a byproduct; the rolls would be stripped and converted into packaging inserts for a major online retailer.
What are the characteristics of a byproduct?
Which methods are used to account for byproducts?
Rationalize which of these possible methods might be best to employ for this scenario.
Explanation / Answer
1)Characteristics of a byproduct:
2)Methods for accounting byproducts:
There are two categories of methods:
3)Best method for the scenario:
The best method for this scenario is miscellaneous income method. This is because in this scenario they wanted to increase the income from byproducts. Hence this method can treat sales value of byproducts as other income & credited to profit & loss account.
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