Question - The Canada Company prepares timber for companies who manufacture furniture. The main product is plywood with a by-product of match sticks. The by-product is sold to matchmakers. For July, the manufacturing process incurred $432,000 in total costs. Ninety thousand metres of plywood were produced and sold along with 6,800 kilograms of match sticks. The plywood sold for $7.00 per metre and the match sticks sold for $0.60a kilogram. There were no beginning or ending inventories of main or by-product.
Required: Prepare two income statements (1) showing the byproduct as a cost reduction during production, and (2) the byproduct as a revenue item when sold.