The Accountant for Barnes Architectural Services Failed to Make an Adjusting

question 31

Multiple Choice

The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7 000 of depreciation expense. Which of the following is TRUE?

• A)Total assets are understated.
• B)Total liabilities are understated.
• C)Total assets are overstated.
• D)Total liabilities are overstated.

Apply the deposit method in transactions where revenue recognition is deferred.

Calculate gross profit on installment sales and understand the concept of deferred gross profit.

Apply the cost recovery method for recognizing revenue when there is uncertainty regarding collectibility.

Understand how to recognize revenue from software sales, including cases with and without significant production, modification, or customization.

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as raw materials or sales commissions.

Prime Cost

The combined costs of direct materials and direct labor that are directly involved in the manufacturing of a product.

Direct Labor

The wages and salaries of employees who are directly involved in the production of goods or services.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of goods, such as utilities, rent, and salaries for managers.