On November 10 of the Current Year, Cherokee Industries Sold $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,840 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline\end{array}$

question 122

Multiple Choice

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 17, assuming the correct payment was received on that date?

• A) \(\begin{array}{|l|r|r|}
• \hline \text { Cash } & 7,840 & \\
• \hline \text { Accounts receivable } & & 7,840 \\
• \hline
• \end{array}\)
• B) \(\begin{array}{|l|r|r|}
• \hline \text { Cash } & 7,840 & \\
• \hline \text { Sales discounts } & 160 & \\
• \hline \text { Accounts receivable } & & 8,000 \\
• \hline
• \end{array}\)
• C) \(\begin{array}{|c|c|c|}
• \hline \text { Cash } & 7,840 \\
• \hline \text { Sales } & 160 \\
• \hline \text { Accounts receivable } &&8,000 \\
• \hline
• \end{array}\)
• D) \(\begin{array}{|l|r|r|}
• \hline \text { Cash } & 8,000 & \\
• \hline \text { Sales discounts } & 160 & \\
• \hline \text { Accounts receivable } & & 8,000 \\
• \hline \text { Sales } & & 160 \\
• \hline
• \end{array}\)

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or services based on a certain activity base.

Variable Manufacturing Overhead

Costs that fluctuate with production volume, such as utilities for the manufacturing plant.

Fixed Manufacturing Overhead

The portion of fixed costs that is directly associated with the production process, including salaries of managers and factory maintenance.

Predetermined Overhead Rate

An estimated charge used for cost allocation within a budget or accounting period, calculated by dividing the estimated manufacturing overhead costs by an allocation base.