If the Debit Amount of an Entry to Record the Purchase

question 84

Multiple Choice

If the debit amount of an entry to record the purchase of supplies on account was not posted:

• A) liabilities would be understated
• B) liabilities would be overstated
• C) assets would be overstated
• D) assets would be understated

Recognize accounting treatment for multiple acquisitions and changes in ownership percentages.

Understand consolidation procedures for subsidiaries acquired during the fiscal year.

Identify the correct recording of realized and unrealized gains or losses from sale of subsidiary shares.

Calculate consolidated equipment account balance post-acquisition.

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Definitions:

Normal Profit

The minimum amount of revenue that a company needs to cover both explicit and implicit costs.

Entrepreneurs

Individuals who, rather than working as employees, run a business and assume all the risks and rewards of a given business venture, idea, or good or service offered for sale.

Allocative Efficiency

A state of resource distribution where resources are allocated in a way that maximizes the total benefit received by all members of society.

Purely Competitive Industry

An industry characterized by many small firms producing identical products, where no single firm can influence the market price.