Making journal entries to record the cost and the sale of a by-product. The Blue Ridge Flour Company has three producing departments: the Grinding Department, the Mixing Department, and the Packaging Department. Five percent of the wheat put into production in the Grinding Department becomes a by-product that has an estimated sales value of $2.30 per cwt. The estimated sales value of the by-product is treated as a reduction in the cost of the main product.

During February 19X6, 500,000 pounds of wheat are put into production. There are no beginning and ending inventories. During February 19X6, the following costs are incurred in the Grinding Department:

Instructions 1. Enter the materials, labor, and overhead costs in the Work in Process—Grinding Department account. Open the Inventory of By-Product account.
2. Prepare the general journal voucher to record the removal of the by-product from the Grinding Department. Number the voucher 2-12. Post the voucher to the general ledger accounts opened.
3. Prepare the general journal voucher to record the sale of half the by-product inventory for $247.50 cash. Number the voucher 2-13. Use the same account names and numbers that are used in the text. Post the voucher to the Inventory of By-Product account.

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Posting Cost Amount Reference Labor Materials $77,330.00 Overhead 7,125.00 J2-11 MR2 9,795.00 J2-10