Which of the Following Statement Is True of Costs of Normal

question 79

Multiple Choice

Which of the following statement is true of costs of normal and abnormal spoilage?

• A) Costs of normal spoilage are shown as an asset in a balance sheet; however, abnormal spoilage costs are shown as liabilities in a balance sheet.
• B) Costs of abnormal spoilage are shown as an asset in a balance sheet; however, normal spoilage costs are shown as liabilities in a balance sheet.
• C) Costs of abnormal spoilage are separately accounted for as losses of the accounting period in which they are detected.
• D) Costs of normal spoilage are separately accounted for as losses of the accounting period in which they are detected.

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Definitions:

Net Income

Total earnings of a company after all expenses and taxes have been deducted from total revenue.

Note Receivable

A financial asset representing a written promise for a debtor to pay a specified sum of money to the creditor on a demand or at a future date.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of the entity, reflected in its cash flows.

Principal Collection

refers to the portion of payments received that goes towards reducing the outstanding principal balance of a loan.