Red Paper Company Processes Wood Pulp into Two Products

question 88

Essay

Red Paper Company processes wood pulp into two products.During March the joint costs of processing were $144,000.Production and sales value information for the month were as follows:
Paper sells for $2.75 a kilogram and cardboard sells for $3.50 a kilogram.There were no beginning inventories for March but ending inventories totalled 10,000 kilograms for paper and 12,000 kilograms for cardboard.Required:
Prepare a product line income statement assuming that joint costs are allocated on the constant gross margin percentage method based on total production.Present production costs and separable costs individually.

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Definitions:

Balance Sheet

A financial statement summarizing a company's assets, liabilities, and owner's equity at a specific point in time.

Biweekly Salaries

A compensation structure where employees are paid every two weeks, typically resulting in 26 pay periods per year.

Fiscal Period

A specific time period for which an organization prepares its financial statements and reports its financial performance.

Adjusting Entry

An accounting record made to update the book balances to reflect the true financial status before preparing financial statements.