O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.O'Hare Company sold Job #132 for $8,200 cash.The job cost sheet for that job reported total manufacturing costs of $5,900.The recognition of this event on the financial statements would include a(n):
A) Decrease to total assets and total equity.
B) Decrease to total liabilities.
C) Increase to total assets, total equity, and net income.
D) Decrease to net income.

Question

Quizplus · Accepted Answer

When O'Hare Company sells Job #132 for $8,200, it will increase the total assets (cash) by $8,200. Since the total manufacturing costs for the job were $5,900, the sale will also increase net income by $2,300 ($8,200 - $5,900). This increase in net income will also increase total equity. No decrease to total liabilities is recorded in this transaction. Therefore, the best choice is C.

O'Hare Company Is a Manufacturing Firm That Uses a Job-Order