Which of the Following Is True of Service Companies

question 71

Multiple Choice

Which of the following is true of service companies?

• A) All costs of service companies are product costs.
• B) Service companies modify and resell products they buy from manufacturers.
• C) Revenues of service companies are only recorded on cash receipt.
• D) Service companies carry no inventories of products for sale.

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Definitions:

Apparent Authority

A doctrine in law where a principal leads a third party to believe that an agent has the authority to act on the principal's behalf, even if the agent doesn't have actual authority.

Agency Contract

A legal agreement wherein one party (the agent) agrees to act on behalf of another party (the principal) in a business transaction or other matter.

Third Party

An individual or group not directly involved in a contract or legal transaction but could be affected by its outcome.

Agency Relationship

A legal and fiduciary relationship between two parties, where one (the agent) is authorized to act on behalf of the other (the principal) in business transactions.