Under the Indirect Method Why Is a Gain on the Disposal

question 45

Multiple Choice

Under the indirect method why is a gain on the disposal of land subtracted from net income?

• A)Because it is not a cash expense.
• B)Because it is not a cash revenue.
• C)Because it is an investing activity.
• D)Because it is a financing activity.

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Definitions:

Job Order Costing

A cost accounting system in which costs are assigned to specific jobs or batches, typical in companies that produce unique products or jobs.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products based on a relevant driver.

Machine Hours

A unit of measure representing the operation time of machines in manufacturing or production processes.

Indirect Materials

Materials used in the production process that are not directly traceable to the finished product, such as lubricants and cleaning supplies.