When the Financial Statements Contain a Material Departure from GAAP

question 14

Multiple Choice

When the financial statements contain a material departure from GAAP that the auditor believes is justified,justification

• A)should appear in a footnote.
• B)should appear in a paragraph added before the scope paragraph.
• C)should appear in the opening paragraph.
• D)should appear in a paragraph added before the opinion paragraph.

Understand the principle of calculating the cost of unused capacity and how it affects the costing system.

Develop an understanding of how job-order costing systems compute manufacturing overhead and apply it to jobs.

Gain insights into the preparation of income statements under a job-order costing system and the impact of cost of unused capacity.

Understand the concept of basing predetermined overhead rates on activity at capacity versus estimated activity for the year.

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Definitions:

Common Stock Dividend

A portion of a company's earnings distributed to holders of its common stock, typically in the form of cash or additional shares.

Treasury Stock

Shares that were once outstanding and have been reacquired by the corporation, reducing the number of shares available on the open market.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often with set dividend payments.