Yellow Co Makes a Sale to a Customer in January but but Does

question 95

Multiple Choice

Yellow Co. makes a sale to a customer in January but does not receive payment until March. Yellow Co. records the sale in January. Which method of accounting is Yellow Co. using?

• A) accrual basis of accounting
• B) cash basis of accounting
• C) hybrid basis of accounting
• D) consolidated basis of accounting

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Definitions:

Units Completed

The total number of units produced and finished during a specific period in the manufacturing process.

Direct Materials

Raw materials that are directly traceable to the production of a specific good or service and an integral part of the finished product.

Direct Labor

The labor costs directly associated with the production of goods, including wages for workers who are physically involved in creating a product.

First-In, First-Out Method

An inventory valuation method where goods purchased or manufactured first are sold or used first.