In the Situation Described in Problem 10,if Lee Records the Asset

question 9

Multiple Choice

In the situation described in problem 10,if Lee records the asset and note at $11,800,the overall effect will be

• A)A correct acquisition cost and correct interest expense
• B)A correct acquisition cost and understated interest expense
• C)An understated acquisition cost and understated interest expense
• D)An overstated acquisition cost and understated interest expense

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Definitions:

Variable Overhead Efficiency Variance

The difference between actual variable overhead based on the hours worked and the standard variable overhead for the same activity level.

July

The month that is positioned seventh in the Gregorian calendar year.

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used in production and the standard quantity expected to be used, multiplied by the standard cost per unit of raw material.

Raw Materials Price Variance

The difference between the actual cost of raw materials purchased and the standard or expected cost, reflecting variances in purchase prices.