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Chapter 21: Q4QS (page 963)

Identify each of the following terms or phrases as either an accounting: (a) principle, (b) assumption, or (c) constraint. 1. Materiality 3. Benefit exceeds cost 2. Time period 4. Revenue recognition.

Short Answer

Expert verified

Constraints in the field of accounting are limitations or the boundariespresent for financial statements and the matching is done with relevant terms or phrases.

Step by step solution

01

Definition of accounting constraints

Accounting constraints are defined as limitations, boundaries which are present while preparing the financial statements of the company.

02

Matching of terms or phrases with principles/assumptions/constraints

Terms or phrases

Principle/Assumption/Constraint

1 Materiality

Constraints

2 Time period

Assumption

3 Benefit exceeds the cost

Constraints

4 Revenue recognition

Principle

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Most popular questions from this chapter

Comp Wiz sells computers. During May 2017, it sold 350 computers at a \(1,200 average price each. The May 2017 fixed budget included sales of 365 computers at an average price of \)1,100 each.

1. Compute the sales price variance and the sales volume variance for May 2017.

2. Interpret the findings.

Hart Company made 3,000 bookshelves using 22,000 board feet of wood costing \(266,200. The company’s direct materials standards for one bookshelf are 8 board feet of wood at \)12 per board foot.

  1. Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.

  2. Interpret the direct materials variances.

What is the predetermined standard overhead rate? How is it computed?

Refer to Exercise 21-13. Hart Company records standard costs in its accounts and its materials variances in separate accounts when it assigns materials costs to the Work in Process Inventory account.

1. Show the journal entry that both charges the direct materials costs to the Work in Process Inventory account and records the materials variances in their proper accounts.

2. Assume that Hart’s materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.

3. Identify the variance that should be investigated according to the management by exception concept. Explain.

Refer to the information from Exercise 21-17. Compute and interpret the following.

1. Variable overhead spending and efficiency variances.

2. Fixed overhead spending and volume variances.

3. Controllable variance.
See all solutions

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