Suppose a Joint Process Yields 3 Main Products and One

question 37

Multiple Choice

Suppose a joint process yields 3 main products and one by-product that has no sales value and is disposed of in the normal garbage. Which of the following is appropriate in accounting for the by-product?

• A) Describe it in a footnote to the financial statements
• B) Allocate a portion of the joint cost to the by-product and show the amount in a loss account on the income statement
• C) Allocate a portion of the joint cost to the by-product and show the amount as a reduction of the processing costs of the main products
• D) None of the above; no accounting treatment is necessary

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Definitions:

Expected Inflation

Expected inflation is the rate at which the general price level of goods and services is anticipated to rise over a specific period.

Unemployment Rate

The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

Friedman-Phelps

An economic theory associated with Milton Friedman and Edmund Phelps, focusing on the natural rate of unemployment and the relationship between inflation and unemployment.

Actual Inflation

The real rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.