(By-product/joint product journal entries) Kansas Wheat Agricultural is a 5,000-acre wheat farm, which produces two principal products, wheat and straw. It sells wheat for $3.50 per bushel (assume that a bushel of wheat weighs 60 pounds). Without further processing, it sells the straw for $30 per ton (a ton equals 2,000 pounds). If the straw is processed further, it is baled and sold for $45 per ton. In 2006, total joint cost up to the split-off point (harvest) was $175 per acre.

In 2006, the farm produced 70 bushels of wheat and 1 ton of straw per acre. If all straw were processed further, baling costs would be $50,000.

a. Diagram the problem similar to those in Exhibits 11-4 and 11-9.

b. Prepare the 2006 journal entries for straw if it is:

1. transferred to storage at sales value as a by-product without further processing with a corresponding reduction of wheat’s production costs 2. further processed as a by-product and transferred to storage at net realizable value with a corresponding reduction of the manufactur¬ ing costs of wheat 3. further processed and transferred to finished goods with joint cost being allocated between wheat and straw based on relative sales value at the split-off point

 LO1.