Your Best Advisors, a Service Company, Uses Reversing Entries

question 146

Multiple Choice

Your Best Advisors, a service company, uses reversing entries. On March 31, 2014, they prepared the following adjusting entry to accrue Utilities Expense: Which of the following entries is the correct reversing entry to be prepared on April 1, 2014?

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Definitions:

Gross Profit

Gross profit is the difference between sales revenue and the cost of goods sold (COGS), showing how efficiently a company produces its products.

Raw Materials Inventory

Stocks of the basic materials and components that are used in production but have not yet been processed or used in the manufacturing process.

Direct Labour

Work specifically conducted by employees directly involved in the manufacturing process of a product.

Manufacturing Overhead

All manufacturing costs excluding direct labor and direct materials, such as utilities and rent for production facilities.