(Accounting for by-products) A by-product, produced from processing the joint products of frozen potato patties and potatoes for dehydration, is potato skins. These potato skins can be frozen and sold to restaurants for use in preparing appetizers. The additional processing and disposal costs associated with such by¬ product sales are $.30 per pound of skins. During May 1998, the Flagler Potato Processors produced and sold 45,000 pounds of potato skins for $23,850. In addition, joint cost for its dehydrated potatoes and frozen potato patties totaled $60,000, and 80 percent of all joint production was sold for $79,000. Nonfactory operating expenses for May were $7,600.

a. Prepare an income statement for Flagler Potato Processors if sales of the by¬ product are shown as other revenue and its additional processing and disposal costs are shown as additional cost of goods sold of the joint products.

b. Prepare an income statement for Flagler Potato Processors if the net real¬ izable value of the by-product is shown as other income.

c. Prepare an income statement for Flagler Potato Processors if the net real¬ izable value of the by-product is subtracted from the joint cost of the main products.

d. Which of the above presentations do you think would be most helpful to managers and why?

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