A Printing Company Prints a Brochure for a Client and Then

question 8

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 not be added to Net Income on the income statement but added to Net Income on the statement of cash flows.
• D) 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.

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Definitions:

Perfect Knowledge

A hypothetical situation in which all parties in the market have complete and absolute information about the market conditions and variables.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Total Revenue

The total income generated by the sale of goods or services related to the company's primary operations.

Peak Efficiency

The point at which an operation or process achieves its maximum output with the lowest input, without waste or undue strain on resources.