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Author Question: Which of the following entries records the receipt of cash for two months' rent? The cash was ... (Read 36 times)

robinn137

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on: Jul 5, 2018
Which of the following entries records the receipt of cash for two months' rent? The cash was received in advanceof providing the service.
 a. Prepaid Rent, debit; Rent Revenue, credit.
  b. Cash, debit; Unearned Rent, credit.
  c. Cash, debit; Prepaid Rent, credit.
  d. Cash, debit; Rent Expense credit.

Question 2

How does ABC costing system help service companies?
 
  What will be an ideal response?


upturnedfurball

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Reply #1 on: Jul 5, 2018
Answer to Question 1

b

Answer to Question 2

Answer: The widespread use of ABC systems in service and merchandising companies reinforces the idea that ABC systems are used by managers for strategic decisions rather than for inventory valuation. Service companies, in particular, find great value from ABC because a vast majority of their cost structure is composed of indirect costs. ABC helps to assign indirect costs to cost objects by identifying activities and cost drivers. As a result, ABC systems provide greater insight than traditional systems into the management of these indirect costs.


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