In 2021, Waverly Corp

question 1

Multiple Choice

In 2021, Waverly Corp. set up a new manufacturing facility in Nova Scotia. To encourage Waverly to set up its factory, the province provided equipment with a fair value of $250,000, and estimated residual value of $0, and an estimated useful life of 10 years using straight-line depreciation. What journal entry would be required in fiscal 2022, using the gross method?

• A)A credit to donation revenue of $25,000.
• B)A credit to other comprehensive income - donated assets of $25,000.
• C)A credit to other income - government grant of $25,000.
• D)A credit to depreciation expense for $25,000.

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Definitions:

Conversion Costs

represent the total expenses incurred to convert raw materials into finished products, which typically include labor and overhead costs.

Process Costing

An accounting methodology applied when identical units are mass produced, assigning average costs to each unit, simplifying the costing process.

Materials Costs

The cost incurred by a company to purchase, handle, and store raw materials used in the production of goods, often comprising a significant portion of total production cost.

Equivalent Units

A method used in process costing that converts partially completed goods into a number of completed units of output.