Eastwood Post Pavillion Received a $650 Check from a Customer

question 5

Multiple Choice

Eastwood Post Pavillion received a $650 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $560 and a credit to Service Revenue $560. The correcting entry is

• A) debit Cash $650; credit Accounts Receivable $650.
• B) debit Cash $90 and Accounts Receivable $560; credit Service Revenue $650.
• C) debit Cash $90 and Service Revenue $560; credit Accounts Receivable $650.
• D) debit Accounts Receivable $650; credit Cash $90 and Service Revenue $560.

---

Definitions:

Direct Materials

Direct materials are raw materials that are directly traceable to the manufacturing of a product and are a significant component of the total manufacturing cost.

Variable Manufacturing Overhead

Costs involved in the manufacturing process that fluctuate with the level of production, such as utility expenses or materials costs.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Absorption Costing

This method includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.