Micron Metallic runs a large metal stamping machine that creates parts for washing machines. In the June reporting period, it recorded $80,000 of scrap from its stamping operations. Since this amount usually represents about 5% of Micron’s cost of goods sold, which is a material amount, the controller always records scrap in a separate account. At the end of each month, a scrap hauler takes away the scrap metal and pays Micron based on the weight of the metal removed. The June payment from the scrap hauler is $800, which the controller records with the following entry:
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Debit |
Credit |
|
|
Cash |
800 |
|
|
Scrap expense |
800 |