Select the Incorrect Statement Regarding Service Companies

question 96

Multiple Choice

Select the incorrect statement regarding service companies.

• A) Service companies do not maintain a Finished Goods Inventory account.
• B) Service companies accumulate their service costs in a Work in Process Inventory account similar to manufacturers.
• C) Service companies may have raw material costs.
• D) Understanding the cost of providing a service is just as important as knowing the cost of making a product.

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Definitions:

Net Income

The net income a company earns once all costs and taxes are subtracted from its total revenues.

Consolidated Gain

The total profit achieved by a group of consolidated entities or a parent company and its subsidiaries, usually reported in consolidated financial statements.

Equipment

Machinery, tools, or other items that are necessary for the production of goods or services.

Equity Method

An accounting technique used to record investments in other companies where the investor has significant influence but does not have full control.