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:

Business Lending

The process by which businesses obtain funds through loans or lines of credit from banks or other financial institutions to finance their operations or expansion.

Home Mortgage Lending

The process by which banks and other financial institutions loan money to consumers for the purpose of purchasing homes, using those homes as collateral for the loans.

Preferred Stockholders

Investors who own shares of preferred stock in a company, granting them a priority over common stockholders in dividend payments and assets upon liquidation.

Fixed Dividends

Regular, predetermined dividend payments made by a corporation to its preferred stockholders.