A Printing Company Prints a Brochure for a Client, and Then

question 73

Multiple Choice

A printing company prints a brochure for a client, and then bills them for this service. At the time the printing company's financial disclosure statements are prepared, the client has not yet paid the bill for this service. How will this transaction be recorded?

• A)The sale will be added to Net Income on the income statement and retained in Net Income on the statement of cash flows.
• B)The sale will be added to Net Income on the income statement but deducted from Net Income on the statement of cash flows.
• C)The sale will neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows.
• D)The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows.

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Definitions:

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Fixed Costs

Costs that do not change with the level of production or sales activities within a certain range or period of time, such as rent, salaries, and insurance.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.

Variable Cost

Expenses that change in proportion to the volume of output or sales, including items like labor and materials.