Which of the Following Inventory Costing Methods Shown Below Is

question 119

Multiple Choice

Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles) for external financial reporting?

• A) absorption costing
• B) variable costing
• C) throughput costing
• D) direct costing

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Definitions:

Accounting Equation

A fundamental principle in accounting that states assets equal liabilities plus equity, forming the foundation of double-entry bookkeeping.

Stockholder Investments

Funds or assets that shareholders provide to a corporation in exchange for ownership interest.

Equity

Equity represents the ownership value held in an asset or a business by its shareholders or owners, calculated as the difference between the value of the assets and the value of the liabilities.

Net Income

The total earnings of a company after subtracting all expenses, including taxes, from its total revenues.