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Income statement showing the byproduct as a cost reduction during production.
The Maryland Company prepares lumber for companies who manufacture furniture. The main product is finished lumber with a byproduct of wood shavings. The byproduct is sold to plywood manufacturers. For July, the manufacturing process incurred $332,000 in total costs. Eighty thousand board feet of lumber were produced and sold along with 6,800 pounds of shavings. The finished lumber sold for $6.00 per board foot and the shavings sold for $0.60 a pound. There was no beginning or ending inventories.
Prepare an income statement showing the byproduct (1) as a cost reduction during production, and (2) as a revenue item when sold.
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