A Company's Operating Income Recently Increased by 30% While Its

question 25

Multiple Choice

A company's operating income recently increased by 30% while its inventory increased in a given year. Which of the following accounting methods would produce the most favorable income results?

• A) Full costing.
• B) Direct costing.
• C) Variable costing.
• D) Standard direct costing.

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Definitions:

Consolidated Balance Sheet

A financial statement showing the total assets, liabilities, and equity of a parent company and its subsidiaries as if they were a single entity.

Fair Value Enterprise Method

A valuation technique that estimates the price at which an asset or liability would be exchanged in an orderly transaction between market participants at the measurement date.

Consolidated Balance Sheet

A financial statement that summarizes the assets, liabilities, and equity of a company and its subsidiaries as a single entity.

Negative Acquisition Differential

A situation where the fair value of net assets acquired in a business combination exceeds the purchase consideration, often leading to a bargain purchase gain.