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:

Capital Stock

Represents the original investment in a company by its owners or shareholders, indicated through the issuance of shares.

Treasury Stock

Shares that were once a part of the outstanding shares but were later repurchased by the company and held in its own treasury.

Common Stock

Equity securities that represent ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Market Price

The current price at which an asset or service can be bought or sold in a public marketplace.