Olson Corporation Constructs New Homes

question 4

Multiple Choice

Olson Corporation constructs new homes. Assume that Olson uses a job-order costing system. During May, the following transactions occurred:
1. Olson purchased $4,500 of lumber on account.
2. Olson used $3,750 of lumber in production and incurred 50 hours of direct labour hours at $15 per hour.
3. Depreciation of $1,500 on equipment used to build new houses was recorded.
4. A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

-Refer to the figure.What debit or credit would be used to record the requisition of lumber for Olson include?

• A)a credit to work in process of $4,500
• B)a debit to materials inventory of $4,500
• C)a credit to finished goods of $3,750
• D)a debit to work in process of $3,750

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Definitions:

Collection Delay

The time lag between issuing an invoice and receiving payment, impacting cash flow and liquidity.

Average Amount

A calculated central value of a set of numbers which is typically determined by dividing the sum of the values in the set by their number.

Average Daily Receipts

The average amount of cash flow received by a company on a daily basis.

Clearing Times

The period it takes for funds to be transferred from one account to another and become available for use.