14. Herb Company manufactured more product than it was able to sell during the c

Question

14. Herb Company manufactured more product than it was able to sell during the current year. If the salaries of the sales staff of Herb Company are improperly rocorded as a product cost, what will be the likely effect on net income of the period in which the error occurs? A. Net income will be overstated B. Net income will be understated C. Net income will be unaffected D. Net income will be understated only if inventory leveis rise 15. .When goods are completed and transferred from the assembly line A. Cost of Goods Sold is debited and Finished Goods Inventory is credited B. Work in Process Inventory is debited and Finished Goods Inventory is credited C. Finished Goods Inventory is debited and Cost of Goods Sold is credited D. Work in Process Inventory is croditod and Finishod Goods Inventory is debited lowing infomation has boen taken from tereual nvenory system of Eite Mifg Co.for the month ended August 31: Do any..e vs Purchases of direct materials Direct materials used Direct labor costs assigned to production lanufacturing overhcad costs incurmred (and appliod S60,000 $50,000 $25.000 $35.000 Balances in inventory Materials Work in Process. Finished Goods August 31 August S 525,000 65,000 $47.000 560,000 $43000 16. Refer to the above data. The total amount of inventory to be included in Elite's August 31st balance sheet amounts to: A. $135,000. B. S210,000. C. $160,000 D. Some other amount 17. Refer to the above data. Total manufacturing costs charged (debited) to Work in Process during August amount to: A S60,000. B. S125,000. C. $110,000. D. Some other amount. Refer to the above data. The cost of finished goods manufactured in August is A. $147,000. B. $92,000. C. $57,000 D. Some other amount. 18. Refer to the above data. The cost of goods sold in August is A $75,000 B. $17,000 C. $135,000 D. Some other amount. 19. has hson taken from the perpetual inventory system of Imperial Mfg Co.for

Explanation / Answer

14. Option a is correct

Net income will be overstated.

Explanation:

As it is treated as product cost, it will be deduct from the revenue as cost of good sold in the period it is sold. So income is overstated till then. It is the salaries of sales staff, which is to be deducted as and when it occurred, so expense are understated and net income is overstated.

15. Option d is correct.

Explanation:

After completion, the job become finished goods and now transferred from WIP to finished good. For this purpose the finished good inventory is debited and WIP is credited.

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