Chapter 18, Problem 3BTN

To determine

1)

Introduction:

Recording of Costs in the Financial Statements

• Purchase of goods and services have to be recorded at the actual cost of purchases and the material purchases account has to be debited.

• Expenses and Assets have debit balances and must be debited to indicate increase in expenses and creation of Assets.

• Recording of material purchases is essential as it has a direct impact on the profitability and inventory carried forward.

To Determine:

The correct account in which purchase of CD Raw materials must be recorded.

To determine

2)

Introduction:

Recording of Costs in the Financial Statements

• Purchase of goods and services have to be recorded at the actual cost of purchases and the material purchases account has to be debited.

• Expenses and Assets have debit balances and must be debited to indicate increase in expenses and creation of Assets.

• Recording of material purchases is essential as it has a direct impact on the profitability and inventory carried forward.

To Determine:

Appropriate response to the Chief Financial Officers’ request