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pishuonlain [190]
2 years ago
13

A company manufactures a single product. During the manufacturing process, a small number of units do not pass final inspection

and are destroyed. What is the appropriate accounting treatment for the cost of these units
Business
1 answer:
faust18 [17]2 years ago
5 0

Answer:

Added to the cost of good units produced

Explanation:

If the goods that do not pass the final tests are destroyed, it means they do not have any residue value. The items are, therefore a production loss to the company.

For accounting purposes, the cost of the defective will be the same as the cost of quality products. They use the same raw materials, labor and production process.  To the account, the difference is that the good product is sold, but the other is destroyed. The total costs of damaged items should be added to the cost of production and spread to all quality produced units.

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Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $12.5 million. The fair value of Midwest's asset
alukav5142 [94]

Answer:

Amount paid for goodwill=5.3 million

Explanation:

The expression for calculating goodwill is given by;

Goodwill = Consideration paid– Fair value of net identifiable assets

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Midwest's liabilities=$1.3 million

Fair value of net identifiable assets=(8.5 M-1.3 M)=7.2 million

Replace in the expression below;

Goodwill = Consideration paid– Fair value of net identifiable assets

Goodwill=12.5 M-7.2 M

Goodwill=5.3 million

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