Campbell County Uses the Consumption Method to Record All Inventories

question 21

Multiple Choice

Campbell County uses the consumption method to record all inventories and prepayments.The City has a 9/30 fiscal year-end.On April 1, 2000, the County purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the General Fund.On the General Fund financial statements, the amount of insurance expenditures for the fiscal year ended 9/30/00 would be

• A)$400,000.
• B)$300,000.
• C)$200,000.
• D)$100,000.

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Definitions:

Recoverable Amount

The recoverable amount is the greater value between an asset's net selling price and its value in use, indicating the potential value that can be recovered from an asset over time.

Impairment Loss

A reduction in the recoverable amount of a fixed asset or goodwill below its book value, recognized as an expense in the income statement.

Profit Margin

The percentage of revenue that remains after all operating expenses, taxes, and costs have been deducted from total sales.

Net Income

The final amount a company keeps as profit after deducting all costs and taxes from its gross revenue.