When the Amount of Scrap Is Material and the Scrap

question 41

Multiple Choice

When the amount of scrap is material and the scrap is sold immediately after it is produced, which of the following is the journal entry if the scrap attributable to a specific job is sold on account?

• A) Scrap Revenues Accounts Payable
• B) Work-in-Process Control Accounts Receivable
• C) Accounts Receivable Work-in-Process Control
• D) Work-in-Process Control Accounts Payable

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Definitions:

Indirect Method

A method of reporting cash flows from operating activities by adjusting net income for changes in non-cash accounts.

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company's operations is used.

Operating Activities

Transactions and events that affect net income, primarily related to the core operations of a business.

Direct Method

An approach to cash flow statement preparation that lists major classes of gross cash receipts and payments.