One Weakness Associated with the Entity Theory Is That

question 18

Multiple Choice

One weakness associated with the Entity Theory is that:

• A) it is inconsistent with the Historical Cost Principle.
• B) Non-Controlling Interest is computed using the fair market values of the subsidiary's net assets.
• C) Non-Controlling interest is computed using the book values of the subsidiary's net assets.
• D) the presumed acquisition cost may be unrealistic when the parent purchases significantly less than 100% of the subsidiary's voting shares, or voting control is achieved incrementally.

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Definitions:

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Curvilinear Fashion

Refers to a curve-shaped pattern of growth, progress, or movement in graphs or data analysis.

Variable Costs

Expenses that fluctuate in direct proportion to the amount of production or the volume of sales, including direct labor costs and raw materials.

High-Low Method

A technique in managerial accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.