The Macon Industries Started the Production of K1 (Its Main

Essay

The Macon Industries started the production of K1 (its main product)and S2 (its by-product)on January 2,2016.During 2016,7,500 units of K1 and 1,500 units of S2 were produced.In 2016,6,000 units of K1 and 1,000 units of S2 were sold at $57.00 and $1.10 per unit,respectively.Production was halted at the end of 2016 and the inventory was sold in 2017 at the normal selling prices.The joint production costs were $240,000 and are entirely avoidable.The separable costs to produce K1 were $2.60 per unit and to produce S2 were $0.45 per unit.Operating expenses were $60,000 in 2016 and $12,000 in 2017.Required:
a.Prepare an income statement for 2016 and 2017 assuming the "other revenue" method of accounting for by-products is used.b.Prepare an income statement for 2016 and 2017,assuming the "cost reduction" method of accounting for by-products is used.