TransAm Mail Service Purchased Equipment for $2,500

question 154

Multiple Choice

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and

• A) nothing further must be done.
• B) debited the retained earnings account for $2,100.
• C) credited another asset account for $400.
• D) credited a liability account for $2,100.

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Definitions:

Direct Materials Purchases Variance

This term refers to the difference between the actual cost of materials purchased and the expected (standard) cost of materials needed to manufacture the products during a specific period.

Materials Price Variance

The difference between the actual cost of materials and the expected (standard) cost.

Raw Material

The basic material from which a product is made, used in the initial stages of production.

Materials Price Variance

The difference between the actual cost of materials and the standard cost multiplied by the quantities purchased.