The Plastechnics Company Began Operations Several Years Ago

question 138

Essay

The Plastechnics Company began operations several years ago. The company's product requires materials that cost $25 per unit. The company employs a production supervisor whose salary is $2,000 per month. Production line workers are paid $15 per hour to manufacture and assemble the product. The company rents the equipment needed to produce the product at a rental cost of $1,500 per month. The building is depreciated on the straight-line basis at $9,000 per year.
The company spends $40,000 per year to market the product. Shipping costs for each unit are $20 per unit.
The company plans to liquidate several investments in order to expand production. These investments currently earn a return of $8,000 per year.
Required:
Complete the answer sheet below by placing an "X" under each heading that identifies the cost involved. The "Xs" can be placed under more than one heading for a single cost, e.g., a cost might be a sunk cost, an overhead cost, and a product cost.

Analyze the effects of not recording a liability on financial statements.

Identify the classifications and characteristics of current and non-current liabilities.

Understand the accounting treatment and implications of interest expenses and finance charges.

Recognize the treatment of deferred revenue and its impact on financial reporting.

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Definitions:

Glorious Revolution

A pivotal event in British history (1688) marking the overthrow of King James II and the establishment of William III and Mary II as co-rulers, leading to the constitutional monarchy.

British Aristocrats

Members of the highest social class in the United Kingdom, traditionally holding hereditary titles and often possessing considerable wealth and influence.

English Monarchy

A system of government in the United Kingdom and its predecessor states where a monarch (king or queen) is the head of state.