Equipment That Had Been Acquired Several Years Ago by a Special

question 18

Multiple Choice

Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the special revenue fund will include:

• A) A debit to Cash for $15,000.
• B) A debit to Accumulated Depreciation for $30,000.
• C) A credit to Equipment for $40,000.
• D) A credit to Other Financing Sources for $5,000.

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Definitions:

Overhead Costs

Indirect expenses related to the day-to-day running of a business, not directly tied to specific product or service production.

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in product costs and treats fixed overhead costs as period costs.

Absorption Costing

An accounting method that incorporates all direct and indirect manufacturing costs into the cost of a product.

Net Profit

The total earnings of a company after subtracting all expenses, including taxes and operating costs, from its total revenues.