In 2006, Lucas Manufacturing Signed a Contract with a Supplier

question 54

Multiple Choice

In 2006, Lucas Manufacturing signed a contract with a supplier to purchase raw materials in 2007 for $700,000.Before the December 31, 2006 balance sheet date, the market price for these materials dropped to $510,000.The journal entry to record this situation at December 31, 2006 will result in a credit that should be reported

• A)as a valuation account to Inventory on the balance sheet.
• B)as a current liability.
• C)as an appropriation of retained earnings.
• D)on the income statement.

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Definitions:

Dividends

The distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

NCI Entry

A journal entry that records the non-controlling interest's share of equity in the consolidated financial statements.

Equity

The value of an owner’s interest in a company, represented by the difference between the company's assets and liabilities.

Dividends

Payments made by a corporation to its shareholder members from the profits or reserves available for distribution, reflecting a share in the company's earnings.