There Are Several Theories for Allocating Constructive Gains or Losses

question 43

Multiple Choice

There are several theories for allocating constructive gains or losses between purchasing and issuing affiliates.The Agency Theory

• A)does so based on the par value of the bonds purchased.
• B)assigns the entire constructive gain or loss to the parent based on their control of the decision to purchase the bonds.
• C)assigns the entire constructive gain or loss to the subsidiary based on the need to have the noncontrolling interest share in the retirement of the debt.
• D)assigns the entire constructive gain or loss to whichever company issued the bonds.

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Definitions:

Unit Costs

Unit costs represent the total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service.

Average Costing

A method of inventory valuation where all goods are assigned the average cost of all similar goods available during the period.

FIFO

An inventory valuation method standing for “First-In, First-Out,” where the cost of the oldest inventory items are the first to be expensed.

Cost Of Production Report

A document that summarizes the production and cost activity within a manufacturing department over a specific period.