Which of the following statements about manufacturing cost flows is false?
A) Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-Process Inventory account.
B) The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during the period.
C) The cost of units sold during the period will typically appear on the income statement.
D) When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account entitled Profit on Sale.
E) Units are normally transferred from Work-in-Process Inventory to Finished-Goods Inventory.

Question

Quizplus · Accepted Answer

The statement in D is false because when a company sells goods, the cost of the goods sold ($54,000 in this case) is recorded as an expense on the income statement, and the sales revenue ($60,000) is recorded as income. The difference ($6,000) is not entered into an account entitled "Profit on Sale" but rather contributes to the net income or profit for the period after all expenses are subtracted from total revenues.

Which of the Following Statements About Manufacturing Cost Flows Is