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:

Universal Life Insurance

Similar to whole life insurance; the cash value can be used to pay the insurance premium if the policyholder doesn’t pay it, but if the cash value is not enough to pay the insurance, the policy can lapse.

Premium Payment

The amount paid for an insurance policy, either as a lump sum or in installments.

Cash Value

The amount available in cash for an insurance policy or investment account, often accessible to the policyholder or investor.

Corporate Bonds

Debt securities issued by corporations to raise capital, with the expectation that they will pay back the principal along with interest.