Which Statement Is NOT True Regarding the Sales Method of Accounting

question 52

Multiple Choice

Which statement is NOT true regarding the sales method of accounting for byproducts.

• A)the method makes no journal entries until the byproduct is sold
• B)this method is the preferred method because of the matching principle
• C)revenues of the byproduct can be recorded in the income statement as revenue
• D)revenues of the byproduct can be recorded as a reduction of cost of goods sold in the income statement

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Definitions:

Contractual Capacity

The legal ability of a person to enter into a binding contract.

Lawful Purpose

Involves activities or objectives that are not illegal or prohibited by law, often a prerequisite in contract law to ensure that the contract’s intent complies with legal standards.

Agency Relationship

A legal relationship between two parties, where one (the agent) is authorized to act on behalf of the other (the principal) in legal or business dealings.

Specific Power

Authority granted to an individual or body to carry out specific actions in a designated context or situation.