Which One of the Following Is Most Likely Violated If

question 6

Multiple Choice

Which one of the following is most likely violated if firm increases the dollar amount reported for unsold inventory on the balance sheet to a cost it anticipates it will have to pay for future inventory items?

• A) Consistency
• B) Conservatism
• C) Going concern
• D) Economic entity

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Definitions:

Variable Costs

Costs that change in proportion to the level of goods or services produced by a business.

Net Income

The amount of profit remaining after all expenses, taxes, and costs have been deducted from total revenue.

Break-even Point

The point at which cost or expenses and revenue are equal, resulting in neither profit nor loss.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials.