Which of the Following Statements Regarding Sales Returns and Allowances

question 117

Multiple Choice

Which of the following statements regarding sales returns and allowances is correct?

• A) Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.
• B) The Sales Returns & Allowances account balance should be added to the Sales account balance when computing net sales.
• C) The Sales Returns & Allowances account is an example of a contra-asset account.
• D) Recording a sales allowance requires two entries.

---

Definitions:

Direct Materials Price Variance

The difference between the actual cost of direct materials and the standard cost, multiplied by the actual quantity purchased.

Actual Costs

The real expenses incurred for goods, services, or other operational activities during a specific period of time.

Standard Costs

The practice of assigning an expected cost to products, with the aim of assessing performance by comparing these costs to actual costs.

Direct Labor Time Variance

The cost associated with the difference between the actual hours and the standard hours of direct labor spent producing a commodity multiplied by the standard direct labor rate per hour.