Which of the Following Statements Is(are) True

question 31

Multiple Choice

Which of the following statements is(are) true?
(A) If variances are prorated at the end of the accounting period, an unfavorable direct materials price variance will, when prorated, increase the value of the Finished Goods Inventory.
(B) Insignificant variances are not generally prorated at the end of the accounting period and are closed to the Cost of Goods Sold.

• A) Only A is true.
• B) Only B is true.
• C) Both of these are true.
• D) Neither of these is true.

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Definitions:

Book Income

The income of a business reported in its financial statements, different from taxable income reported to the IRS.

Taxable Income

The amount of income used to determine how much tax an individual or a corporation owes to the government, after all deductions and exemptions have been accounted for.

Tax-Exempt

A status that exempts individuals or organizations from having to pay certain taxes.

Tax Liability

The total amount of tax owed to the government by an individual, corporation, or other entity within a given tax period.