The Allowance for Unrealized Holding Gains That Appears in the Cost

question 9

Multiple Choice

The allowance for unrealized holding gains that appears in the cost of goods sold section of a federal financial statement effectively does which of the following?

• A) Adjusts the latest acquisition cost inventory valuation to the historical cost valuation.
• B) Increases the cost of goods sold by the increase in market value of the inventory.
• C) Decreases the cost of goods sold by the increase in market value of the inventory.
• D) Adjusts the historical cost valuation to the latest acquisition cost inventory valuation.

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Definitions:

Fixed Cost

Costs that do not change with the level of output or sales in the short term, such as rent, salaries, and insurance.

Depreciation Expense

The portion of the total cost of a tangible asset that is charged as an expense in a reporting period, due to its reduction in useful life.

Sensitivity Analysis

A technique used to determine how different values of an independent variable impact a particular dependent variable under a given set of assumptions.

Variable Costs

Expenditures that increase or decrease in tandem with production volume.