If a Company Reporting Under ASPE Decides to Use the Cost

question 8

Multiple Choice

If a company reporting under ASPE decides to use the cost model to account for an investment in common shares, dividends received should be

• A)credited to the Investment account.
• B)credited to the Dividend Income account.
• C)debited to the Investment account.
• D)recorded only when 20% or more of the shares are owned.

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Definitions:

Inventory Costing

The process of assigning costs to inventory items based on the method chosen (e.g., FIFO, LIFO, or weighted average) to accurately value the inventory on the balance sheet and match costs to revenues on the income statement.

Perpetual Inventory

An inventory system that updates the quantity and value of inventory after each transaction or event.

Interim Financial Statements

Financial reports covering a period of less than one year, often used to provide a more immediate view of a company's financial health.

Cost Flow Assumption

Refers to the method used by companies to value and manage inventory; common examples include FIFO (First In, First Out), LIFO (Last In, First Out), and average cost.