Which Statement Is Correct About Cost Allocation Methods Under GAAP

question 151

Multiple Choice

Which statement is correct about cost allocation methods under GAAP?

• A)FIFO method expenses the oldest costs first.
• B)FIFO method has the oldest costs on the balance sheet.
• C)FIFO method has the most recent costs in the income statement.
• D)FIFO is not an acceptable cost allocation method.

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Definitions:

Sales Commissions

A form of compensation to salespersons for their sales achievements, usually calculated as a percentage of the sales they generate.

Net-of-Tax Basis

A method of presenting financial figures after the effect of taxes has been considered or deducted.

Depreciable Equipment

Tangible assets, such as machinery or hardware, acquired for use in operations, which lose value over time due to usage, wear and tear, or obsolescence and can be depreciated.

Prior-Period Adjustment

Corrections of errors made in previously published financial statements, not considered ordinary adjustments.