By-Product Costing That Uses the Asset Recognition Method(s) Creates

question 54

Multiple Choice

By-product costing that uses the asset recognition method(s) creates:

• A)Expense recognition in the current period.
• B)A distortion of net income.
• C)An adjustment on the income statement.
• D)An inventory value in the period in which the by-products are produced.
• E)A result that is not compatible with GAAP.

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Definitions:

Net Sales

the revenue generated from the sale of goods or services, after deducting returns, allowances for damaged or missing goods, and discounts.

Acid Test Ratio

A financial metric used to determine a company's liquidity by comparing its most liquid assets (excluding inventory) to its short-term liabilities.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation each year over an asset's useful life.

Scrap Value

The estimated value that an asset will realize upon its sale at the end of its useful life.