Page 485 - F2 - MA Integrated Workbook STUDENT 2018-19

Answers

Step 5 – complete the normal loss (scrap) and abnormal loss accounts

(a) the normal loss is transferred to the normal loss account

(b) the abnormal loss is transferred to the abnormal loss account

(c) the abnormal loss increases the availability of scrap to be sold. It is
transferred from the abnormal loss account to the scrap account at the
scrap value.

(d) the balancing figure in the abnormal loss account shows the net loss
from having lost more than expected.

(e) the balancing figure in the scrap account represents the cash received
for the sale of the loss.

Normal loss (scrap) account
Kg $ Kg $

(a) Process 100 180 (e) Cash/Bank 200 360
account (NL)
(c) Abnormal 100 180
loss
–––– –––– –––– ––––

200 360 200 360
–––– –––– –––– ––––

Abnormal loss

Kg $ Kg $
(b) Process 100 2,280 (c) Normal loss 100 180
account (AL)
(d) SoPL 2,100

–––– ––––– –––– –––––
100 2,280 100 2,280

–––– ––––– –––– –––––

Note: the normal loss is sold for cash so the bank account is debited with the
normal loss proceeds of $180. The abnormal loss is also sold for scrap at
$1.80 per kg so a further 100 × $1.80 = $180 would be debited to the bank
account.

The net effect is that the abnormal loss is valued at $2,280 – $180 = $2,100

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