If a Long-Lived Asset Is Sold and the Carrying Amount

question 22

Multiple Choice

If a long-lived asset is sold and the carrying amount is higher than the proceeds received,

• A) profit will be increased.
• B) profit will be decreased.
• C) there will be no effect on profit.
• D) the current ratio will increase.

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Definitions:

Variable Component

A portion of a cost or expense that varies directly with changes in production volume, business activity, or other variables.

Least-Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of the squares of the differences between observed values and those predicted by the model.

Inspection Cost

Expenses associated with the activities necessary to ensure that products or services meet the required standards and specifications.

Contribution Format

A format for the income statement that divides variable costs from fixed costs to emphasize the contribution margin.