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Direct materials of $10,000 are requisitioned by the production supervisor for the production area. Job order costing is used. The journal entry to record this transaction is:
a. work in progress inventory $10,000 direct materials inventory $10,000
b. direct materials inventory $10,000 accounts payable $10,000
c. direct materials inventory $10,000 work in progress inventory $10,000
d. finished goods inventory $10,000 direct materials inventory $10,000
Using the information above, calculate the net present value of costs (cash outflows) and decide whether it should be purchased in the budget year. Assume a 10 per cent cost of capital (discount rate).
Theory question based on revenue recognition - What factors does the standard discuss that may impair the ability to make a reasonable estimate of returns?
What is materiality? Why might the inventory loss concern management more than it does the auditors? Do you think the amount of inventory loss is material?
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