Comparable financial statements are designed to compare the financial statements

Question

Comparable financial statements are designed to compare the financial statements of two or more corporations. An extraordinary loss of $300,000 that results in income tax savings of $90,000 should be reported as an extraordinary loss (net of tax) of $210,000 on the income statement. The controller s staff consists of management accountants responsible for systems and procedures, general accounting, budgets, taxes, and cost accounting Managerial accounting provides useful information to managers on product costs. The cost of materials entering directly into the manufacturing process is classified as factory overhead cost. For an automotive repair shop, the wages of mechanics would be classified as direct labor cost. Conversion cost is the combination of direct materials cost and factory overhead cost. Nonmanufacturing costs are classified into two categories: selling and administrative. Conversion costs consist of product costs and period costs. The materials requisition serves as the source document for debiting the accounts in the materials ledger. If the underapplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of the fiscal year. As product costs arc incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory. Job order cost accounting systems may be used for planning and controlling a service business.

Explanation / Answer

1 FALSE Comparable Financial Statements are not designed to compare the financial statements of two or more corporations but of the same corporation for two or more years. 2 FALSE It will not be reported as net of tax 4 FALSE Managerial Accounting provides information about how the managers are working 5 FALSE Cost of Material is Direct Material Cost 6 TRUE 7 FALSE It is Direct labour & Overhead Costs 8 TRUE

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