Island Industries Inadvertently Recorded a $5,000 Betterment as an Ordinary

question 93

Multiple Choice

Island Industries inadvertently recorded a $5,000 betterment as an ordinary repair.Which of the following will occur as a result of this mistake?

• A)Assets will be overstated by $5,000.
• B)Assets will be understated by $5,000.
• C)Net income will be overstated by $5,000.
• D)Retained Earnings will be overstated by $5,000.

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Definitions:

Activity-Based Costing

A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.

Control Levels

The different stages or layers of management and supervision within an organization, designed to ensure policies and procedures are implemented effectively.

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities they require, leading to more accurate product costing.

Departmental Overhead Rate Method

The departmental overhead rate method allocates overhead costs to specific departments based on their respective operational metrics, helping in accurate product costing and profitability analysis.