Question:
Making journal entries-by-product
Alphabet Manufacturing Co. makes one main product, X, and a by-product, Z, which splits off from the main product when the work is three-fourths completed. Product Z is sold without further processing and without being placed in stock. During June, $1,200 is realized from the sale of the by-product. Make the entries to record the recovery and sale of the byproduct, on account, on the assumption that the recovery is treated as one of the following:
a. A reduction in the cost of the main product
b. Other income