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Multiple Choice

1) Western Company purchased direct materials on account. The materials cost will be recognized as an expense when:
a. The materials are purchased.
b. The goods made with the material are sold.
c. The cash is paid to settle the associated accounts payable.
d. The manufacturing process is complete.

2) If manufacturing overhead is underapplied, the entry to close the overhead account at the end of the accounting will act to:
a. Increase net income.
b. Decrease net income.
c. Not affect net income.
d. Increase cash flow from operating activities.

Solution Preview

1. b. The goods made with the material are sold.

When the material is purchased, it is stored as a current asset in the form of inventory. ...

Solution Summary

The solution explains two multiple choice questions relating to cost accounting