Your Company Buys a Computer System from IBM for $3

question 28

Multiple Choice

Your company buys a computer system from IBM for $3 million and pays IBM $200,000 to install the computer system.Your company should record:

• A)$3 million in equipment,and $200,000 in expenses.
• B)$3.2 million in expenses.
• C)$2.8 million in equipment and the rest in expenses.
• D)$3.2 million in equipment.

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Definitions:

Actual Cost

The tangible and realized expense incurred for materials, labor, and overhead in the production of goods or services.

Standard Cost Systems

An accounting method that uses standard costs for direct materials, labor, and overhead to help managers control business costs.

Performance Evaluation

The formal assessment process of an employee's job performance, typically conducted through reviews and meetings.

Actual Costing System

A costing method that assigns costs to products based on the actual costs of direct materials, direct labor, and overhead incurred.