A Company Sells Merchandise on a Deferred Payment Plan,ultimately Receiving

question 170

Multiple Choice

A company sells merchandise on a deferred payment plan,ultimately receiving $6,000 on the account receivable.On the payment date,the company would

• A)credit Accounts Receivable for less than $6,000.
• B)debit Interest Income for the imputed amount.
• C)credit Sales for less than $6,000.
• D)debit the asset account for $6,000.

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Definitions:

Standard Quantity

This term refers to the amount of input (materials, labor, etc.) that should be used in the production of a unit of goods under normal conditions.

Standard Price

A pre-determined cost allocated to a single unit of product or service, used for budgeting and performance evaluation.

Ideal Standards

Standards that assume peak efficiency at all times.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected (standard) quantity, multiplied by the standard cost of those materials.