Proration of Manufacturing Cost Variances Among Ending Inventories and Cost

question 167

Multiple Choice

Proration of manufacturing cost variances among ending inventories and cost of goods sold has the effect of carrying the cost (savings) of inefficient (efficient) operations of a period to:

• A) Only the balance sheet of the current period.
• B) Only the income statement of the current period.
• C) The balance sheets of future periods only.
• D) The income statement of the current period and the balance sheet of the current period.

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Definitions:

Paid-In Capital

Funds raised by a company through the issuance of shares to investors, exceeding the par or stated value of the shares.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer, which may not be indicative of the market value.

Debit Balance

A debit balance is the amount that remains in a particular account within a bookkeeping ledger, primarily indicating money owed or expenses that have surpassed credits.

Retained Earnings

This part of shareholders' equity reflects the accumulated net income retained for reinvestment in the business, rather than being paid out in dividends.