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ACCOUNTING On February 19 of the current year, Quartzite Co. pays $5,400,000 for land estimated to contain 4 million tons of recoverable ore. It installs machinery costing$400,000 that has a 16-year life and no salvage value and is capable of mining the ore deposit in 12 years. The machinery is paid for on March 21, eleven days before mining operations begin. The company removes and sells 254,000 tons of ore during its first nine months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine’s depletion as the machinery will be abandoned after the ore is mined. Prepare entries to record (a) the purchase of the land, (b) the cost and installation of the machinery, (c) the first nine months’ depletion assuming the land has a net salvage value of zero after the ore is mined, and (d) the first nine months’ depreciation on the machinery. Describe both the similarities and differences in amortization, depletion, and depreciation. Verified answer
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Other Quizlet setsRelated questionsA variable costing income statement is helpful in performing cost, volume, and profit (CVP) analysis. It is therefore also known as: Contribution margin income statement Contribution margin income statement Which of the following statements is true? The change in production does not
affect net operating income under variable costing system The change in production does not affect net operating income under variable costing system Consider the following information: Units produced and sold 1,000 units
Based on above information, the variable cost of goods sold is: $12,000 Under absorption costing, when inventory decreases the fixed manufacturing overhead is: Deferred in inventory Released from inventory Consider the following information: Number of units produced 2,000 units Based on the information, what is the unit product cost under absorption costing system? $30 Under variable costing system, the unit product cost includes: Direct materials, direct labor, variable overhead, and fixed overhead Direct materials, direct labor, and variable overhead When inventory increases, the fixed manufacturing overhead is deferred in inventory under: Variable costing Absorption costing If the contribution margin is $5,000, variable cost is $4,000, and net operating income is $2,000, what is the fixed cost? $3,000 $3,000 The inventories do not change under either absorption costing or variable costing when: Production is more than sales Production is equal to sales Consider the following information: Net operating income under variable costing $25,000 Based on the above information, the net operating income under absorption costing is: $35,000 The reason of difference in net operating income under variable costing and absorption costing is: Change in selling price Change in inventory Absorption costing is also known as: Change in selling price Full costing Variable costing is also known as: Absorption costing Direct/marginal costing When inventory decreases, the net operating income under absorption costing is: Always lower than variable costing Always lower than variable costing A business segment that is responsible for all of its revenues and expenses is known as: Investment center Profit center Under absorption costing, the unit product cost includes:
Direct materials, direct labor, variable overhead, and fixed overhead Direct materials, direct labor, variable overhead, and fixed overhead The reports generated by variable costing system of a company is mostly used by: Lenders and creditors internal management Consider the following information: Net operating income under variable costing $50,000 Based on the above information, the net income under absorption
costing is: $30,000 Which of the following is not included while computing unit product cost under variable costing: Direct labor cost fixed manufacturing overhead cost The reports generated by absorption costing (also known as full costing) is used by: Creditors All of the above If sales revenue is $35,000, fixed cost is $5,000, and net operating income is $10,000, what is the contribution margin? $30,000 $15,000
If the sales revenue is $5,000, fixed cost is $1,000, and net operating income is $2,000, what is the variable cost? $8,000 $2,000 Consider the following information: Opening inventory 25,000 units Based on the above information, the number of units produced during the period is: 135,000 units When inventory increases, the net operating income under absorption costing is: Always equal to variable costing Always higher than variable costing
Consider the following information: Units produced 50,000 units Based on the above information, what were the total units sold? 45,000 units A company manufactures 1,000 units of product X per year. The cost data is given below: Direct
Materials $5 Per Unit Based on the above information, the variable cost to manufacture one unit of product X is: $12 What is absorption costing used for?Absorption costing, sometimes called “full costing,” is a managerial accounting method for capturing all costs associated with manufacturing a particular product. The direct and indirect costs, such as direct materials, direct labor, rent, and insurance, are accounted for by using this method.
Who uses absorption costing reports?1 Although any company can use both methods for different reasons, public companies are required to use absorption costing due to their GAAP accounting obligations.
Why is absorption costing also called full costing?Absorption costing is also known as full costing since it includes all the costs associated with production. Variable costs are direct labour and material costs. Fixed costs include rent, security, and insurance expenses.
Which costing method is also known as full costing?Absorption costing is a costing system that is used in valuing inventory. It not only includes the cost of materials and labor, but also both variable and fixed manufacturing overhead costs. Absorption costing is also referred to as full costing.
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The reports generated by absorption costing (also known as full costing) is used by:
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