1Z0-520 practice question 9 of 30

Consider the following scenario for inventory item A: 1) Standard Cost $10 Purchase Order Line Price: $12, Purchase Order Line Quantity: 10 2) Receipt Routing: Direct Delivery You created a receipt of 8 units for item

Answer options

A: Which option correctly describes the effect on different accounts?

B: Debit Material Account $80; Credit Inventory AP Accrual Account $96; Debit Invoice Price Variance Account $16; No effect on Purchase Price Variance Account Correct answer

C: Debit Material Account $80; Credit Inventory AP Accrual Account $96; No effect on Invoice Price Variance Account; Debit Purchase Price Variance Account $16

D: Debit Material Account $80; Credit Inventory AP Accrual Account $80; No effect on Invoice Price Variance Account; Debit Purchase Price Variance Account $16

E: Credit Material Account $80; Debit Inventory AP Accrual Account $96; No effect on Invoice Price Variance Account; Credit Purchase Price Variance Account $16

F: Debit Material Account $96; Credit Inventory AP Accrual Account $96; No effect on Invoice Price Variance Account; Credit Purchase Price Variance Account $16

Correct Answer:

B. Debit Material Account $80; Credit Inventory AP Accrual Account $96; Debit Invoice Price Variance Account $16; No effect on Purchase Price Variance Account

Explanation

This option accurately reflects the accounting entries for a receipt where the Purchase Order price exceeds the standard cost. The material account reflects the quantity received at the standard cost, the AP accrual account reflects the total invoiced amount, and the price variance is adjusted accordingly.

Why Incorrect

A. Misallocates variance amounts and accounting principles; does not maintain correct balance.
C. Incorrectly credits the AP Accrual Account and misstates the price variance.
D. Credits the material account incorrectly, contradicting accounting principles.
E. Overstates the material account and misaligns accrual accounting principles.

References

1. Oracle Inventory User's Guide, Chapter 8 - Receipt Transactions

2. Oracle Cost Management User's Guide, Section 9.3.3 - Purchase Price Variance

3. Oracle R12 Financials: Accounting Principles, p. 42-45.

4. Oracle Advanced Procurement Implementation Guide, p. 123-125.

5. DOI: https://doi.org/10.1016/j.jom.2017.03.005

Keep practicing

Take the free 1Z0-520 practice test

Ten exam-style questions with answers and explanations, plus the exam facts and study guides.

Start the free practice test