Accounting for By-products Happy Tree Lumber produces one main product (lumber) and one by-product (wood chips). The following are taken from its books at the end of the month. Selling price per pound...

Accounting for By-products

Happy Tree Lumber produces one main product (lumber) and one by-product (wood chips). The following are taken from its books at the end of the month.

Listed below are the transactions during the month of December:

• Purchased $150,000 of raw material for cash.


• Requisitioned $150,000 of direct materials for production.


• The company paid direct labor costs of $20,000 for work done on the raw materials.


• The company applied $80,000 manufacturing overhead.


• Recorded the cost of goods finished during December. The lumber and the wood chips are both finished and ready to be sold.


• The company sold all of the lumber for $300,000.


• Recorded the wood chips sold during December.

Listed below is the transaction during the month of January:

• Recorded the sale of the wood chips.

Requirement: Prepare the journal entries using the (a) production method and (b) sales method. Use perpetual inventory system.