Michael Paints Has Two Processes-Coloring Department and Mixing Department

question 10

Multiple Choice

Michael Paints has two processes-Coloring Department and Mixing Department. Michael assigned $385,000 to the 5,500 gallons of paint transferred from Mixing Department to Finished Goods Inventory. The journal entry to record completion of processing is:

• A)debit Work-in-Process Inventory-Mixing, $385,000; credit Finished Goods Inventory, $385,000.
• B)debit Finished Goods Inventory, $385,000; credit Cost of Goods Sold, $385,000.
• C)debit Cost of Goods Sold, $385,000; credit Finished Goods Inventory, $385,000.
• D)debit Finished Goods Inventory, $385,000; credit Work-in-Process Inventory-Mixing, $385,000.

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Definitions:

Acid-test Ratio

A stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory.

Current Ratio

A financial ratio indicating a firm's capacity to settle short-term debts due within a year, determined by dividing its current assets by its current liabilities.

Marketable Securities

Financial instruments and assets that are easily liquidable and can be converted into cash quickly at a reasonable price.

Sales on Account

Revenues generated from sales where payment is deferred to a later date.