In a Decision Relating to the Possible Elimination of a Department

question 54

Multiple Choice

In a decision relating to the possible elimination of a department consideration would need to be given to which of the following factors?
I. Alternative uses of the space currently occupied by the department
II. Adverse effect of the elimination of sales of other departments
III. Whether all of the direct operating expenses are avoidable

• A) None of the factors.
• B) I and III only.
• C) I and II only.
• D) I, II and III.

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Definitions:

Accrued Interest

Accrued interest is interest that has been incurred but not yet paid, often relating to bonds or loans over the period between interest payment dates.

Equity Method

An accounting method in which the investment in common stock is initially recorded at cost, and the investment account is then adjusted annually to show the investor’s equity in the investee.

Stock Investments

Financial assets representing ownership in a company or corporation, typically traded on stock exchanges.

Debt Investments

Financial assets purchased with the expectation that the original funds will be returned over time with interest, typically including bonds or loans.