A New Computer, Which Had Been Estimated to Cost $28,000

question 37

Multiple Choice

A new computer, which had been estimated to cost $28,000, was received. The actual cost of the computer was $29,400. To record this in the special revenue fund,

• A) Capital assets should be debited for $29,400.
• B) Expenditures should be debited for $28,000.
• C) Expenditures should be debited for $29,400.
• D) There is no entry in the special revenue fund. The General Capital Assets account should be debited for $28,000.

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Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard quantity allowed for the actual output, multiplied by the standard price per unit of materials.

Standard Quantity

The predetermined or budgeted amount of materials expected to be used in the production of a product, based on efficiency and productivity standards.

Variable Overhead Efficiency Variance

The difference between the actual hours taken to produce a good and the standard hours expected, multiplied by the variable overhead rate.

Excessive Inventories

A situation where a company holds more stock items than necessary, leading to increased storage costs and potential wastage.