The Materiality Constraint

question 12

Multiple Choice

The materiality constraint:

• A) States that an amount can be ignored if its effect on financial statements is unimportant to user's business decisions.
• B) Requires use of the allowance method for bad debts.
• C) Requires use of the direct write-off method.
• D) States that bad debts not be written off.
• E) Requires that expenses be reported in the same period as the sales they helped produce.

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Definitions:

Custom Jewelry

Jewelry pieces that are specially designed and crafted according to the specifications provided by a customer.

Weighted-Average Method

This inventory costing method assigns the average cost of goods available for sale during the period to both ending inventory and cost of goods sold.

Equivalent Unit

A calculation used in cost accounting that converts partially completed goods into a number of complete units of output, helping in the costing process of production.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units available during the period.