When the Actual Price to Purchase a Raw Material on Account

question 40

Multiple Choice

When the actual price to purchase a raw material on account is less than its standard price, the journal entry would include:

• A)Credit to Raw Materials; Credit to Materials Price Variance
• B)Credit to Accounts Payable; Credit to Materials Price Variance
• C)Credit to Raw Materials; Debit to Materials Price Variance
• D)Credit to Accounts Payable; Debit to Materials Price Variance

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Definitions:

Abnormal Returns

Returns on a security that exceed what is predicted by market models, often attributed to unforeseen events or information.

Publicly Available Information

Information that is accessible to the general public, including but not limited to financial reports, press releases, and government documents.

Debt Hypothesis

A theory suggesting that the level of a company's debt influences its value by affecting tax payments and bankruptcy risks.

Accounting Policy

Own sets of beliefs, bases, manners, dictates, and systems placed by a corporation in the making and publicizing of its financial declarations.