Why Is a Cost Flow Assumption Used

question 119

Multiple Choice

Why is a cost flow assumption used?

• A)This is a systematic method for allocating costs between beginning inventory and ending inventory.
• B)This is a systematic method for allocating costs between cost of goods available for sale and ending inventory.
• C)This is a systematic method for allocating costs between cost of goods sold and ending inventory.
• D)This is a systematic method for allocating costs between cost of goods manufactured and cost of goods sold.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Accounts Receivable

Money owed a company by its clients or customers who have promised to pay for the products at a later date.

Commercial Paper

A written promise from one company to another to pay a specific amount of money.