An Accountant Buys Pencils to Be Used in Calculating the Taxes

question 12

Multiple Choice

An accountant buys pencils to be used in calculating the taxes of other business firms. Based on this information, pencils in this case would be considered as:

• A) MRO supplies.
• B) process materials.
• C) raw material.
• D) convenience.
• E) consumer.

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Definitions:

Direct Method

A method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom.

Cost of Service Departments

Expenses connected with the operations that provide supportive services within a company but do not directly contribute to the production process.

Direct Method

The direct method in cost accounting allocates service department costs directly to producing departments without attempting to apportion them among service departments.

First-In, First-Out Method

An inventory valuation method where the earliest items purchased or produced are the first to be sold, affecting the cost of goods sold and inventory valuation.