When should the disposal value of scrap be recognized in the accounting records: at the time scrap is produced or at the time scrap is sold?
• How should revenue from scrap be accounted for? To illustrate, assume the scrap from a job has a disposal value of $45. • Recognizing Scrap at the Time of Its Sale When the disposal value of scrap is immaterial, the simplest approach is to make a note of the quantity of scrap returned to the storeroom and to regard the sales as scrap revenues. The only journal entry is: Cash or Accounts Receivable 45 Scrap Revenues 45 When the disposal value of scrap is material and the scrap is sold quickly after it is produced, the accounting depends on whether the scrap is attributable to a specific job or is common to all jobs: Scrap attributable to a specific job Cash or Accounts Receivable 45 Work-in-Process Control 45 Unlike spoilage and rework, there is no cost attached to the scrap, and hence no distinction is made between normal scrap and abnormal scrap. Scrap common to all jobs Cash or Accounts Recivable 45 Manuf. OH Control 45 When scrap is common to all jobs, the expected sales of scrap
