Enjoy, Inc. is a producer of potato chips. A single production process at Enjoy, Inc., yields potato chips as the main product, as well as a byproduct that can be sold as a snack. Both products are fully processed by the splitoff point, and there are no separable costs. For September 2020 , the cost of operations is $510,000. Production and sales data are as follows: (Click the icon to view the production and sales data.) 1,2020 . \begin{tabular}{|lrrr|} & Production (in pounds) & Sales (in pounds) & Selling Price per pound \\ \hline Potato Chips & 44,000 & 33,440$ & 18 \\ Byproduct & 8,400 & 4,500$ & 5 \\ \hline \end{tabular} 1. What is the gross margin for Enjoy, Inc., under the production method and the sales method of byproduct accounting? 2. What are the inventory costs reported in the balance sheet on September 30 , 2020 , for the main product and byproduct under the two methods of byproduct accounting in requirement 1 ? 3. Prepare the journal entries to record the byproduct activities under (a) the production method and (b) the sales method. Briefly discuss the effects on the financial statements. Requirement 1. What is the gross margin for Enjoy, Inc., under the production method and the sales method of byproduct accounting? (Enter a "0" for any cells with a zero balance. For the main product inventory: Calculate the proportion of inventory first, then complete your calculation.) Requirement 2. What are the inventory costs reported in the balance sheet on September 30,2020 , for the main product and byproduct under the two methods of byproduct accounting in requirement 1 ? (Enter a "0" for any cells with a zero balance.) Requirement 3a. Prepare the journal entries to record the byproduct activities under the production method. (Record debits first, then credits. Exclude explanations from journal entries. Select "No journal entry needed" on the first line of the journal entry table and leave the other cells blank if a journal entry is not required.) Begin by preparing the entry to record the direct materials purchased and used in production during September. Record the entry for the cost of goods completed (for the byproduct) during September. Record the entry for the cost of goods completed (for the main product) during September. Record the entry for sales of the byproduct during September. Record the entry for sales of the main product during September. (Do not record the cost, we will do this in the next step.) Record the entry for the cost of the main product sold during September. Requirement 3b. Prepare the journal entry to record the byproduct activities under the sales method. (Record debits first, then credits. Exclude explanations from journal entries. Select "No journal entry needed" on the first line of the journal entry table and leave the other cells blank if a journal entry is not required.) Begin by preparing the entry to record the direct materials purchased and used in production during September. Record the entry for the cost of goods completed (for the byproduct) during September. F next step.) Record the entry for the cost of the main product sold during September. Briefly discuss the effects on the financial statements. Under the method revenue is not recognized for the sale of the byproduct. Instead, the NRV of the is offset against the cost of the This method is consistent with the matching principle and is therefore the preferred method. Under the method, the NRV is recognized only upon sale
