A Concern Raised by Opponents to the Line-By-Line Method Is

question 57

Multiple Choice

A concern raised by opponents to the line-by-line method is that:

• A) The benefits flowing from assets in a joint venture cannot be seen as belonging to any individual joint venturer.
• B) Since joint ventures may be set up to share output or assets merging the assets, liabilities, income and expenses of this activity with those of a strictly profit-oriented enterprise reduces the usefulness of the information provided.
• C) The method aggregates assets that are controlled by the entity with those that are the subject of joint control.
• D) There is a problem attaching a value to potential income arising out of the shared outputs that are common to many joint ventures. Until an acceptable measurement method can be developed, opponents argue that note disclosures about joint ventures are more appropriate.
• E) None of the given answers.

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Definitions:

Equivalent Units

A concept used in cost accounting to convert units of production into an amount of completed units to measure progress.

Conversion Costs

Costs specifically associated with converting raw materials into finished goods, which include labor and overhead.

Whole Units

The number of units in production during a period, whether completed or not.

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First-In, First-Out."