When an Equipment Dealer Receives a Long-Term Note in Exchange

question 167

Multiple Choice

When an equipment dealer receives a long-term note in exchange for equipment, the present value of the future cash flows received on the notes:

• A)Is treated as a current liability at the exchange date.
• B)Is recorded as interest revenue at the exchange date.
• C)Is recorded as interest receivable at the exchange date.
• D)Is credited to sales revenue at the exchange date.

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Definitions:

Overapplied Overhead

A situation where the allocated manufacturing overhead cost is more than the actual overhead incurred.

Underapplied Overhead

A situation where allocated overhead costs are less than the actual overhead incurred.

Job-Order Costing

A costing method used to calculate the costs associated with producing specific orders or batches, where the costs for materials, labor, and overhead are compiled and assigned to each job individually.

Overapplied Overhead

A situation where the overhead costs allocated to products or services exceed the actual overhead costs incurred.