The Divesting Firm Is Required to Recognize a Gain or Loss

question 98

True/False

The divesting firm is required to recognize a gain or loss for financial reporting purposes equal to the difference between the fair value of the consideration received for the divested operation and its market value.

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Definitions:

Standard Costs

Predetermined costs for materials, labor, and overhead used as a benchmark to measure actual performance against.

Direct Labor-Hours

The total hours of labor directly involved in the production of goods or services.

Direct Materials Variances

The difference between the actual costs of direct materials used in production and the standard or expected costs.

Fixed Overhead

Expenses that remain constant regardless of how much is produced or sold, including items like lease payments, wages, and insurance premiums.