Describe Two Methods of Accounting for By-Products

question 46

Essay

Describe two methods of accounting for by-products. What effects do these methods have on the allocation of the joint cost to the main products?

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Definitions:

Loss On Redemption

The financial loss experienced when a debt security is redeemed before its maturity date for more than its par value.

Carrying Value

The book value of an asset on a company’s balance sheet, calculated as the original cost minus accumulated depreciation.

Bonds

Long-term debt securities issued by corporations or government entities that pay periodic interest until maturity, at which point the face value is repaid.

Bond Premium

The extra amount by which a bond's market price exceeds its face value.