On October 1 of the Current Year, a Company Received

question 37

Multiple Choice

On October 1 of the current year, a company received $6600 for services to be performed evenly over the next six months. If no adjusting entry was made on December 31 of the current year:

• A)net income would be understated by $6600.
• B)net income would be understated by $3300.
• C)net income would be overstated by $1650.
• D)net income would be overstated by $3300.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate overhead costs to products or job orders, calculated before the accounting period.

Machine-Hours

A measurement used in allocating manufacturing costs to products, representing the number of hours a machine is operated during the production process.

Predetermined Overhead Rate

The predetermined overhead rate is calculated before a period begins by dividing estimated overhead costs by an estimated allocation base, used to assign overhead costs to products.

Machine-Hours

A measure of production time, describing how many hours a machine is in operation.