Maxie's Game World Sold Games to a Customer on Credit

question 62

Multiple Choice

Maxie's Game World sold games to a customer on credit for $2,600, terms 1/10, n/30 and the cost of the games was $1,700. When recording the sales transaction in its sales journal, Maxie's would enter:

• A) $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cost of Goods Sold Dr./Inventory Cr. column.
• B) $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Cost of Goods Sold Dr./Inventory Cr. column.
• C) $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr. column.
• D) $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Accounts Payable Dr./Purchases Cr. column.
• E) $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Other Accounts Dr. column.

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the budgeted cost of labor at the standard rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost accounting.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on the predetermined rate.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the direct costs of production.