Which Statement Is Correct About Cost Allocation Methods Under GAAP

question 1

Multiple Choice

Which statement is correct about cost allocation methods under GAAP?

• A)LIFO method expenses the oldest costs first.
• B)LIFO method has the most recent costs on the balance sheet.
• C)LIFO method has the most recent costs in the income statement.
• D)LIFO is an acceptable cost allocation method.

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Definitions:

Consolidated Financial Statements

Financial statements that represent the consolidation of a corporation and all its subsidiaries, portraying the financial position and performance of the company as a single entity.

Reporting Entity

A reporting entity is an entity or economic unit for which financial statements are prepared and presented to users.

Parent Entity

A company that has control, directly or indirectly, over other companies or subsidiaries.

Control

The ability to control the economic and functional strategies of an organization in order to gain advantages from its operations.