Cash Contributed to a Joint Operation Was Used to Purchase

question 26

Multiple Choice

Cash contributed to a joint operation was used to purchase machinery ($500 000) and raw materials ($120 000) . The following entry would be part of the overall recording of these transactions:

• A) DR Machinery $500 000 DR Raw materials $ 120 000
• CR Cash $620 000
• B) DR Work in progress $620 000 CR Joint operation capital $620 000
• C) DR Cash $620 000 CR Contribution to joint operation $620 000
• D) DR Cash $620 000 CR Machinery $500 000
• CR Raw materials $ 120 000

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Definitions:

Inflation

A widespread rise in prices and a decrease in the value of money.

Spending Multiplier

A concept in Keynesian economics that quantifies the effect of an increase in autonomous spending on the total economic output.

Potential Output

The highest level of economic output that can be sustained over the long term without increasing inflation.

MPC

Marginal Propensity to Consume, which indicates the fraction of additional income that a household is likely to spend on consumption.