Question
Axe Furniture and Accessories Inc. sold an oak custom minus designed harvest table for $4,000 on July 31, 2018. The wood, labor, and overhead costs
Axe Furniture and Accessories Inc. sold an oak custom minus designed harvest table for $4,000 on July 31, 2018. The wood, labor, and overhead costs of $1,200 were incurred during the three months leading up to the sale (May, June, and July). Under the expense recognition principle, which of the following statements would be true?
A.The costs of $1,200 should be systematically recognized by spreading the costs as cost of goods sold over the three months that the production of the table took place.
B.The costs of $1,200 should be expensed as cost of goods sold in the month of July under the concept of matching costs with related revenue in the period the revenue occurred.
C.The cost of the table should be recognized as cost of goods sold in the earliest period in which the company knew that the table would eventually be sold and, in this case, that would be in May.
D. The cost of the table should not be recognized as an expense as it is an asset called merchandise inventory and therefore it is a point minus in minus time element.
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